Good morning, and thank you for joining The AES Corporation Third Quarter 2023 Financial Review Call. My name is Kate, and I will be the moderator for today's call. [Operator Instructions] I would now like to turn the call over to your host, Susan Harcourt, Vice President of Investor Relations. You may proceed.

Thank you, operator. Good morning, and welcome to our third quarter 2023 financial review call. Our press release, presentation and related financial information are available on our website at aes.com. Today, we will be making forward-looking statements. There are many factors that may cause future results to differ materially from these statements, which are discussed in our most recent 10-K and 10-Q filed with the SEC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andres Gluski, our President and Chief Executive Officer; Stephen Coughlin, our Chief Financial Officer; and other senior members of our management team. With that, I will turn the call over to Andres.

Good morning, everyone, and thank you for joining our third quarter 2023 financial review call. In addition to discussing our third quarter and outlook for the remainder of the year, I will address some concerns that we have heard from investors since our second quarter call in August. Specifically, my remarks today will focus on three areas: strategic and financial updates, our funding sources, and our exposure to interest rates. Beginning on Slide 3. I am pleased to report that our financial results continue to be strong and we now expect full year adjusted EPS to be in the top half of our guidance range of $1.65 to $1.75. We are also reaffirming all of our short- and long-term financial metrics. For the third quarter, adjusted EBITDA with tax attributes was $1 billion, and adjusted earnings per share was $0.60. I'm very pleased with these results, which Steve will address in more detail shortly. Turning to Slide 4. We continue to see strong demand for long-term contracts for renewables, particularly from our primary customer base of large technology companies with a rapidly expanding data center business. Notably, even with rising interest rates, renewables continue to have the lowest levelized cost of energy, or LCOE, across almost all of the markets where we operate. So far this year, we have signed 3.7 gigawatts of new PPAs, including 1.5 gigawatts since our second quarter call in August. This number does not include the 1.2 gigawatts of new projects we were recently awarded in New York. Given that we have several large contracts that could be finalized in the coming weeks, we remain confident in our ability to sign at least 5 gigawatts of new long-term PPAs this year. Included in the new contracts that we have already signed, is our first-ever developed…

Thank you, Andres, and good morning, everyone. Today, I will discuss our third quarter results, our 2023 guidance, how we are flexing our plans to adapt to current financial market conditions and how we minimize our exposure to interest rates. Turning to our financial results for the quarter, beginning on Slide 10. I'm pleased to share that we had a strong third quarter and are fully on track to achieve our full year guidance. Adjusted EBITDA with tax attributes was just over $1 billion versus $991 million last year, driven primarily by higher contributions at our Renewables SBU, the recovery of prior year's purchase power costs at AES Ohio included as part of the ESP4 settlement and improved results at Fluence. These drivers were partially offset by the absence of the significant LNG transaction margins, which we earned last year. Tax attributes earned by our U.S. renewables projects this quarter were $18 million versus $60 million a year ago, in-line with our expectations of a higher share of renewable projects coming online in the fourth quarter. Turning to Slide 11. Adjusted EPS was $0.60 versus $0.63 last year. In addition to the drivers of adjusted EBITDA, we saw higher parent interest expense this quarter as well as a higher adjusted tax rate. I'll cover the performance of our strategic business units or SBUs in more detail over the next few slides, beginning on Slide 12. In the Renewables SBU, we saw higher adjusted EBITDA with tax attributes, driven primarily by higher contributions from new projects brought online in the last 12 months, as well as higher margins in Colombia. This was partially offset by lower tax credit recognition as a result of fewer new projects placed into service this quarter versus a year ago. Our business continues to make strong…

Thank you, Steve. Before moving to Q&A, I would like to briefly address a few other concerns that we have heard from some of you regarding the future of the renewable sector in general. For starters, global warming is, unfortunately, very real and likely accelerating. We have seen it in all-time record temperatures over the past five years and especially this summer in the Northern Hemisphere. This new reality was reflected in record demand for energy during heat waves, unprecedented wildfires and more volatile rainfall, all of which affect the general public. Completely apolitical actors, such as insurance companies, are pulling out of certain markets in vulnerable areas after suffering material losses due to climate change. It is, therefore, extremely unlikely that major corporations will abruptly walk away from all of their carbon reduction goals regardless of any short-term unscientific political rhetoric. Given all that is happening in the renewable space, it is now more important than ever to differentiate among companies and developers. In my opinion, nobody is better placed than AES to create shareholder value from the ongoing energy transition because we have been focusing for years on the most resilient and lucrative opportunities. We are among the largest suppliers of renewable energy in the most attractive markets in the U.S., California, New York and PJM. We are also the biggest supplier of renewable energy to corporations in the world and particularly to data centers. Already, data centers represent half of our U.S. backlog and the growth of generative AI will only accelerate their demand for more renewable energy. An important differentiator is that AES is one of the very few major renewable developers that has not had to abandon projects in its backlog due to cost increases or supply chain disruptions. This has cemented our reputation for…

Thank you. [Operator Instructions] The first question will be from the line of David Arcaro with Morgan Stanley. Your line is now open.

So strong update in terms of the contract originations within the renewables development portfolio. I was wondering if you could elaborate on what you're seeing in terms of that backdrop, the trends in customer demand. There have been concerns in the market around renewable slowdown given the higher PPA prices financing challenges, et cetera. Wondering if you could talk about what your conversations are like with your customers? Are there pockets of weakness? Or is there still an ample opportunity set out there for contract signings?

What we're seeing is very strong demand from our target customers. So we have not seen a weakening. And as we said, it's -- I think it's very important to distinguish what markets you're operating in. So markets like California and New York, PJM, there is very strong demand. And there's very strong demand from corporations, especially from the tech companies in the data center business. So we have not seen a slowing down. Now, if you're talking about WEC and auctions for public utilities, et cetera, we're seeing a lot more competition for those projects. But for the -- our target customers in our target markets, we're seeing demand very firm.

Great. That's helpful. That's encouraging. And then maybe a question on the asset sale outlook here. You're accelerating -- targeting $2 billion over the next two years, I guess, what gives you the line of sight there? How is that market in terms of project sales? Are you seeing demand and the kind of off-takers there to acquire projects? And what are you seeing in terms of pricing? Are there favorable yields versus what you're developing those projects at?

Okay. So I think that's sort of two parts of the question. So a lot of the asset sales are selling out or selling down a specific businesses as we have been doing for the past decade. Our businesses continue to perform very well. So we see that there is interest in these businesses, because it's not -- again, not all businesses are created equal and we have very favorable positions in these markets. We're also seeing great interest for people to partner with us. And that also includes our existing partners for greater participation. So those are things which decrease the equity needs over the next four, five years. So I think that's very important to see that we're balancing both. I think the question regarding the sell-down of renewable projects, I'll pass over to Steve, so he can give you an update on that.

Yes, that's going well. We -- as part of our sales, Andres walked through in his comments, there's a number of ways we achieve it. With the renewable sell-downs, we typically will sell down after the projects come online. And these are very low risk, long duration cash flows. Our average contract duration is 19 years. Obviously, no variable fuel cost, very little variable O&M in these types of assets. So they're very attractive -- and so yes, returns expectations have come up somewhat, but not in lockstep with where base rates have come because of the very low risk profile of these assets. So those sell-downs continue to yield a lift in AES' equity returns commensurate with what we've talked about in the past, David.

The next question will be from the line of Durgesh Chopra with Evercore ISI. Your line is now open.

Just want to start off with a quick housekeeping question here. Just the $0.10 EPS upside that we talked about, Steve, from projects potentially being moved from '24 into late '23, is that factored into your raised EPS guidance now, or is that still an upside?

Yes. So a portion of it, Durgesh, so we did guide to 100 megawatts over at least this year, so the 3.4 to 3.5. So just a portion of that $0.10 is included. And the good thing is we have a very clear line of sight at this point to that increase as mechanical completion has been achieved on 93% of the new capacity. That means everything is all built out. We're just in final synchronization of equipment and systems. And so, we feel very confident in the year-end number. That which does not come online this year of that upside will be in the first half of next year.

Got it. Okay. That's clear. And then maybe, Steve, there was a report from credit rating agency highlighting sort of weakening of your credit metrics here and then going into 2024. And then, Andres and you both talked about the importance of maintaining a strong balance sheet. Could you just sort of frame for us what your expectation is? With these asset sales because obviously, there's going to be a cash flow drop. What the expectation is for your FFO debt metrics next year versus your downgrade thresholds?

Yes. So one thing I would point out is that the credit metrics do fluctuate some during the year as we have higher construction balances in the middle of the year. We also have a higher level on our corporate revolver as projects come online towards the end of the year, paying down construction balances, and then we have the corporate revolver used to manage timing and distributions from our subsidiaries. The other thing to keep in mind is that we are in a high-growth mode. So at any point in time, we do have construction debt that's not yet yielding and that's all non-recourse. And it's also used to finance the tax credit value as well. So there's very quick paydowns on that debt once these projects come online. But no, we feel -- we're in regular contact with all the rating agencies. We feel very good about exceeding -- not just meeting but exceeding the thresholds. The other thing to keep in mind is that our leverage is amortizing. So most of our project level debt is amortizing over the PPA period. So this is a very low risk structure. It's non-recourse and it's not subject to significant bullets and it allows us to maintain a leverage ratio that will grow just proportionately -- our debt will only grow proportionately to the cash flows of the business.

Okay. So but just to be clear though, Steve, I mean, next year, you feel with the plan that you have in place that versus your downgrade thresholds, you'll exceed them, right, into 2024?

Yes, absolutely. This is a top priority metric in all of our planning. So maintaining investment credit is at the top. And so as we look at the asset sales -- keep in mind, we already had a significant amount, $2.7 billion to $3 billion considered in our Investor Day numbers. And we are prioritizing assets that both hit our strategy, but as well are minimally dilutive on earnings, cash and credit. So I'm very confident that we will not impact our credit metrics negatively with the plans that we have.

Got it. Perfect. And I know just -- but I just want to ask just one last question, and then I'll pass it on to others. But just Andres you mentioned active discussions with a lot of parties on assets. $3.5 billion is already very significant in asset sales. Could that number be higher as you sort of get more interest as you have those discussions?

At this point in time, I would say that we feel that we will sell at least $3.5 billion through end of 2027, but a lot of these, again, are partial sell-down, sell-down of renewables, our plan to exit from coal. So if you look in the past, we've done a multiple of this number. I'd also point out that I'm not aware of any time that we have set a target for asset sales and not achieved it or exceeded it. So we feel very confident in achieving those asset sale numbers.

The next question will be from the line of Angie Storozynski with Seaport Global. Your line is now open.

Okay. So first, I wanted to -- you mentioned about -- you mentioned transferability of tax credits. I just wanted to make sure that were not in a sense window dressing and trying to solve for a certain credit metrics, but this is actually driven by economics. So when I look back to your Analyst Day, you financed your renewables in the U.S., 40% tax equity, 40% project level debt and then 20% equity. So I just wanted to make sure that, that structure is still in and we're not trying to basically boost credit metrics by levering these projects more? And again, just explain to me that why we're moving from the traditional credit -- tax equity structures, which allowed you to monetize accelerated depreciation, among others to the transferability?

Yes. Angie, it's Steve. Thanks for the question. No, it is important to recognize that AES has always been maximizing their tax credit value. And so that continues to be the case. The reality is the transfers offer a more -- a broader market -- a broader set of market participants. I think a more liquid market, so many more corporates coming in from different sectors. It's a faster, simpler transaction to execute, but we'll still do both because it's important that you not only monetize the tax credit value but also the benefit of the accelerated depreciation which is not something that's transferable and does require either AES or a partner in the asset to be able to utilize that accelerated depreciation benefit. So there'll be hybrids done here. But my primary point is that it is a broader market, simpler transactions, more liquidity. And I do think it's appropriate that it shows up in operating cash and free cash because this is truly an important component of value and a return to the investment that gets made in the assets.

Okay. So that's treatment so that the FFO uplift under those structures, you already considered that when you quantified your equity needs during the Analyst Day?

So I would say at this point, we have already done 500 megawatts in transfer credits. The market is moving faster. So, I think in the Analyst Day, I would say there's upside in terms of our cash flow metrics related to the use of more transferability. But it's not necessarily something that is changing returns or anything. It's just that it's creating more visibility, more market participation and shows up in the operating cash flow.

Okay. But again, it's -- you're still sticking with solar ITCs. Again, that financing structure that I mentioned at the beginning, doesn't change, right? So you're not increasing leverage of the project, okay.

No, we are not just to be clear. So we are not increasing leverage at the projects that we are only looking to monetize the tax credits as efficiently as possible. And I would expect that given our credibility and our track record, any discount applied to the credits will be quite small relative to perhaps other market participants. And then, Andy, just also to reiterate, as I have said in the past, we choose the credit option based on what is the best cash financial return from the credit. So whether in most cases, that's been ITC for us, it makes very little sense to be choosing production-based credits, for example, in New England solar, where the capacity factors tend to be quite small. So I would question anyone that's doing that in their motives, but we are very focused on what's the credit that is yield the best return.

Okay. And then secondly, you mentioned the attractiveness of renewables versus other sources of power based on the levelized cost of electricity, so i.e., new-builds for renewables versus new-builds for thermal assets. But -- and not everywhere, do you have to actually add incremental generation sources, right? And then the pushback that we are hearing is that the PPA prices have now slightly exceeded forward power prices, be it on peak for solar or around the clock for wind. So again, I understand the distinction with tech clients, but how about any other locations and any other off-takers for new renewables?

Well, again, we're talking about the markets where we're located. And the way I look at it is a little bit different. I mean, in terms of the energy, the LCOE, again, as I said, in most markets that we're operating, it is the cheapest. The issue with renewables is really having that dispatchable 24/7. So you need to complement it with regular power or batteries, which will require even more renewals. But I think the state is a huge play. So you can't say in every single location. But certainly in states that have high solar radiation or high wind, that's just the fact. I mean, the real issue is more having the 24/7 capability.

Okay. And then the last question about the -- some flexibility on the retirement of the coal plants. I understand the reliability needs of local grids, et cetera. But this is not your renewables coming online later than expected. It's just more of the market backdrop in which the coal plants operate. Is that correct?

Exactly. No, exactly. You're taking it right. And as we've always indicated, we need regulatory approval to retire the coal plants. So what we're seeing is in some of the markets not us, but the general build-out of renewables enough transmission has been somewhat slower than planned and that these plants are likely to be needed through 2027. But I would add that this is the small minority of our total plants, okay? So we've gone from 22 gigawatts to 7. We have line of sight to about 4 of that is already planned. And of the remaining roughly 3, it would be a minority of that in terms. So I'm not talking about any walking away from our decarbonization plan. It's just a question that there -- we're seeing there's a couple of plants where it's going to be difficult to take them off-line prior to the expiry of their PPAs.

The next question will be from the line of Richard Sunderland with JPMorgan. Your line is now open.

Andres, you spoke to active conversations on the asset sale front. I'm curious if you can outline at a high level how advanced those discussions are? And if this is an effort that could yield any announcements before year-end or I guess, earlier on in that sort of '24, '25 window?

Yes. It's a good question. I would think that, again, it's over a two-year period, but I would expect some important announcements in the first half of next year. And again, we tend to announce things when they're very firm. So the negotiations, et cetera, are ongoing. It's several assets. But yes, I would expect to be able to say something in the first half of next year.

Understood. And then looking back at, I guess, it's Slide 7, where you lay out the potential asset sales. Has any of your thinking on those buckets in terms of what's actually in those buckets changed since the May Investor Day, I guess, in particular, I'm thinking about the noncore businesses and if there are any new thoughts there relative to six months ago?

What I'd say is, yes, I really can't comment on that. I would say stay tuned, and we will make announcements in that regard. But it's mostly assets that we have designated as noncore over time. So it's more of an acceleration or perhaps a deepening of some of the sell-downs.

That's helpful. And I'll try this from one other side if you'll indulge me here, new and expanded partnerships. New partnerships, any flavor for what that means? Just again, trying to get a sense of the scope of the opportunity. Obviously, you've laid out the magnitude with this $2 billion figure in the over $3.5 billion in total.

Well, what I'd say is see what we've done in the past. So for example, if you look at when we made a big move into renewable energy, we -- our first big acquisition was sPower and we brought in a new partner and that relationship has evolved over time. So we're in a number of fields, which are very attractive right now. So I think it's an interesting time to see what our partners want to do or if some additional partners want to come in. But we're really sitting in a privileged position, especially for a lot of the new growing fields.

The next question will be from the line of Julien Dumoulin-Smith with Bank of America. Your line is now open.

First question here, I'm going to take it and play in every direction. All right, deal. $3.5 billion here. You talk about coal exits of selective assets in '27. To me, I hear that, and I'm asking well, how much does that delay some of the loss of contribution in the plan out to '28, i.e., the earlier targets that you gave through '27 contemplated full divestment of these assets. Now I get that you're raising the asset divestment target. So in theory, there's going to be fewer assets at the end. So in theory, you should be sacrificing some of the net income to the plan. But obviously, by selling some of the coal assets in '27, you're delaying or deferring some of the chunkiest lowest multiple assets potentially and the loss of the contribution into '28. I just want to like kind of hear how you think about that '27 versus '28, are you effectively pushing out a little bit of an earnings impact from '27 into '28 if you think about it or from '25 into '28?

What I'd say is you're basically right that say, operating through the end of a couple of plants, PPAs, we have that flexibility, it would be beneficial. In terms of our asset sales, I mean, we have -- our assets have different earnings profiles. So, how would I say, we feel confident that we have a plan in place that we will hit our numbers. Now when you talk about post 2027, getting into '28, there'll be a balance between bringing in partners for some of those growth projects post '28. And there are a lot of factors, I think, happening in the market. I would expect, quite frankly, in our numbers, we don't have much more efficiency improvements, and we're working on a lot of technologies, which should have that. So in the net, again, you're right about some of the big blocks, but I really think that -- I feel very confident about our numbers, what they're going to look like '28 forwards because we have a really a pull position in all these new technologies and new sectors that are opening up. So there's not going to be a cliff that were pushed off into '28. I want to make that clear. As we've made clear in the past, there's no cliff in '26. So we manage -- we have a lot of variables, a lot of levers. So we're making sure that we have a smooth transition. So our real problem is not one of demand. There's a tremendous amount of demand, tremendous opportunities, is that what we want to make sure is that we're maximizing value per share and taking advantage of it and being smart in the best combination of levers that we pull.

No. Look, I get it. It makes sense. And just to clarify, the select assets, though, those are the ones that the PPAs are expiring or the -- otherwise been regulatory issues, right? Again, I think that's a nice catch all, right? If that's the way you're framing it, one or the other?

Well, that's correct. I mean that we have some assets that may be still under contract and that -- it's going to be -- it's looking more difficult to get regulatory approval to retire those assets in '25.

Right. Yes, indeed, right. There's a couple of them that stand out, if you will, that would seem to fit that right?

I guess.

I know you don't want to be too specific [indiscernible]. I'm sorry, I'm trying to be less specific here. Quickly, if I can pivot here real quickly. Yes, go for it.

I was just going to say, there's a number of ways we're exiting both the retirements and sales. So looking at this, we have 7 gigawatts of coal. We've already announced and the exits of half of that. So you're talking about 3.5% roughly remaining. And we're not talking about that whole amount. Even a small portion of that are these assets that will be selectively considered.

Yes. as I said, it's a small part of the 3 that's remaining.

Yes. Okay. Sorry, I just wanted to try to put that in a box a little bit more. And just to clarify this, the partial monetization, how do you think about Fluence here just to hit that a little bit more squarely? I know it's a sensitive subject, whatever you can offer here about how you think about that through the plan? You talk about beginning next year here on sell-downs bit large, not specific to the new technologies bucket. Whatever you can offer?

We can't call for much that we haven't said already. I mean what we've said is that we are really as an accelerator of new technologies. We create a lot of applications together. They help us. That's why we're the leader, I think, in the premium markets. But over time, we will monetize the positions. It's not just Fluence. We have other investments as well. And those new technologies have progressed very well. So we have other companies besides Fluence. But I'm not -- we really can't provide any further color on that.

And you feel confident in the previous marks in the other technologies? I mean, I know it's been a little bit of time there, but that's important as well.

Sure. I mean -- there are different ones of levels of maturity. But of course, you have Uplight, which is, I think, proceeding well and incorporating more product offerings and becoming part of Schneider Electric's energy efficiency offerings. But then we have other ones that are in earlier stages. And whether they will create a lot of value outside of what they create for us. So certainly, one of the more exciting ones is the building of solar farms with robotics, I think, has a lot of promise. If you look at a longer term sort of four years out there, I would expect a lot from that. There's a lot -- we're doing a lot with AI operationally for us. I mean today, we use AI on the operations of our wind farms of next-day predictions for energy demand and weather. We're also using -- Fluence is using on its bidding engines, but there's much, much more. We have collaborated with some of the technology companies on things like grid visualization, et cetera, which I think will become part and parcel of how ISOs manage their build-outs and dispatches and reaction to natural catastrophes. And we do have a -- we would receive part of the royalties from the sales of the technology companies because we co-created them with them. So these are all things that are not in our numbers, but I think we'll we will be able increasingly to have significant cost savings and greater efficiencies from applying them. And in some cases, we'll be able to monetize these over time at the right time when market conditions are right.

Yes, absolutely. Sorry. And just a quick clarification, more setting expectations ahead. You guys have done a lot on the new origination front. You flagged it at the outset, this 5 gigawatt number, I think. Just to set expectations, you've also done a number of acquisitions of backlog here, too. How does that mesh with your commentary about origination, a? And b, should we expect a steady cadence of announcements of further backlog acquisitions here as some of these have been the higher price points? Again, I just want to tackle that directly and give you an opportunity to kind of bifurcate and clearly set expectations.

Look, we -- I think you have to -- when you think about what we're doing is we're making -- creating the most value of the different assets we have. So we did our first sale of -- in the pipeline, if you will, with the DTA, where we actually don't build the project, but we sell a development project because we felt that, that was the greatest creation of value. So sometimes from our pipeline, we may be doing this because that's the best use of that pipeline. As I said in the past, probably the most attractive thing for us to do is to acquire late-stage development projects when -- especially when we have a premium customer who needs that energy. And why? Well, because -- well, you have a development project, it's some cost if you have to invest to create that development project. And so you don't know what is the conversion rate of your pipeline. So if you have something that's in late stage your conversion rate is basically one if you have the client. So it's a very good risk-adjusted rate of return. So we're going to be doing all those things. In the case of one of our utilities, they're buying one of the projects that have been developed by somebody else. We're selling one from the pipeline. Others are going to be repowering. So, we'll use all of the means at our disposal to create shareholder value. So I don't think it's -- the way to think about this correctly, is just pipeline, greenfield through final delivery is the best way to create value. I think it's really -- the most important really is having the right projects in the right markets and the right clients and thinking about how can you best satisfy what the clients' needs are. So I just mentioned that we can talk about it off-line. But quite frankly, what we're seeing is that all things being equal, acquiring late-stage projects, and it is a buyer's market now. It is one of the most attractive businesses for us.

The final question for today's call will be from the line of Michael Sullivan with Wolfe Research. Your line is now open.

I wanted to start with, can we just confirm if there's been any change to your levered returns targets in the current environment up or down? And then maybe also just you alluded to it a little bit, but just a sense of like how much LCOEs or PPA pricing on new projects have changed?

Okay. I'll take the first part of that. I'll have the second -- I'll pass that to Steve. Look, we are getting from our portfolio sort of low-teen returns. And that's at the project level. If we would include sort of core financing or mezzanine financing, we'd be high-teen returns. I don't think anybody is getting consistently higher returns than us because of the type of projects, the type of markets that we're in and the scale. We have sufficient scale to compete with anybody. And we have I think, had the best record of supply chain management. So, what I think has changed, we use a CAPM model, which is updated for risk-free U.S. treasuries, and they have moved up, obviously. So that's when we calculate our net present value that really comes into effect. So we do look at what's the net present value from these projects. So what I would say is that we've been able to pass on higher interest rates, pass on higher cost. And cost, by the way, are coming down. Battery prices are down 50%, solar prices are receding. And we do new projects for corporate clients outside of the U.S. And solar panels are near all-time lows. So all that put together, yes, we are using higher discount rates to see if the projects worthwhile pursuing in our net present value. And we have maintained our margins. And so we're seeing right now no stress on the market from that side. Now the second question you wanted to talk about was the particular projects here in the States and the returns we're seeing.

Yes. So I would say, generally in the States with our corporate clients, in particular, where we're doing structured products, we are seeing the higher end of that return range. And also, it's important, while PPA prices have been increasing, over the past one to two years, they've actually leveled off and are starting to come back down. We've seen significant reductions in solar module pricing this year. We've seen significant reductions in the commodities going into batteries and battery pricing coming down. So we're starting to see levelized costs come back down, which is also supporting the activity and the demand going forward. So I think we're in kind of past the difficulties of the supply chain past the impacts of the inflation and back to a declining curve in the key technologies we're using.

Yes. Michael, maybe something that hasn't been asked on this call is that, first, we had the first project that we know they got the energy community additional 10%, which was a Chevelon Butte wind project, the largest wind project in Arizona. But we're also -- in terms of our wind farms, we are achieving the domestic content requirements. We expect that Fluence will be having next year, starting to receive domestic -- sufficient domestic content from its batteries and from its and casings. And then we're also in discussions for solar. We were one of the first to start discussions for solar. So what we see is upside from domestic content additionality. And we also see the energy communities we have already been achieving that. So I'll remind you, at least 40% plus of our pipeline is in energy communities as is today. So that would all be upside. So we are seeing upsides from the IRA in terms of the returns of some of the projects, especially those that are already signed.

Okay. One quick last one. Just -- can you give any thoughts on just the initial intervenor testimony in the Indiana rate case and what the path looks like from here to whether it be settlement or final order?

Yes. So just to kind of put things in context, too. This is our first rate case in over five years. And as I mentioned in my comments, we have the lowest residential rates in Indiana of any utility. So we're starting from a very good place. We had our IRP last year where we also have a lot of support for the growth that's there. So of course, any process like this, there are multiple stakeholders involved and interveners, they need to be heard. But we feel very good about what we asked for, given our position with the lowest rates and the growth plan that's been supported through the IRP. And again, it's our first rate case in five years. So in terms of timing, at this point, I would say, middle of next year for this to be all resolved and new rates to come into effect thereafter.

Thank you. That concludes today's Q&A session, and I will turn the call back over to Susan for final remarks.

We thank everybody for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have. We look forward to seeing many of you at the EEI Financial Conference later this month. Thank you, and have a nice day.

That concludes today's conference call. Thank you all for your participation, and you may now disconnect your lines.