Hello, everyone, and welcome to the AES Corporation Second Quarter 2025 Financial Review Call. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] I would now like to turn the call over to Susan Harcourt, Vice President of Investor Relations. Susan, please go ahead.

Thank you, operator. Good morning, and welcome to our second quarter 2025 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 disclosed 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; Steve Coughlin, our Chief Financial Officer; Ricardo Falu, our Chief Operating 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 second quarter 2025 financial review call. Today, I'm pleased to reaffirm both our 2025 guidance and our long-term growth targets. Our business remains resilient, and we continue to execute on our strategy, which I will discuss in more detail. Following my remarks, Steve Coughlin, our CFO, will provide additional color on our financial performance and outlook. Before delving into our second quarter results, allow me to share a few thoughts regarding the state of the electricity market in the U.S. Obviously, the past couple of months have seen major policy announcements, which will have a significant impact on the sector. Not to get distracted by some of the noise surrounding these developments. It's important to keep in mind key market fundamentals. Demand for energy in the U.S. is growing rapidly by historical measures. Prices are rising, and the bulk of new additions over the next 5 years will be renewables and energy storage. These are the technologies that can be feasibly built, given their shorter time to power, advanced development pipeline existing supply chains, competitive levelized cost of energy and customer preference. Current government policies aim to increase the amount of future power coming from fossil fuels nuclear and enhanced geothermal. While measures can be taken to increase generation from existing thermal plants, new additions will take years to materially come online, some more than others. In the meantime, AES has a mature pipeline of renewables and battery storage with a substantial safe harbored backlog of signed PPAs, positioning us to meet our clients' growing energy needs. As an all-of-the-above energy company, we had the capabilities to deliver those technologies that are most cost competitive and demanded by our customers. We see our business model as supplying not a specific technology,…

Thank you, Andres, and good morning, everyone. I'm very pleased to share that AES had a great second quarter, keeping us well on track towards our full year 2025 guidance targets. First, turning to adjusted EBITDA on Slide 13. Second quarter adjusted EBITDA was $681 million versus $658 million a year ago. This was driven by significant growth from new renewables projects and the positive impact from cost reductions we announced on our fourth quarter call. These were partially offset by several portfolio changes, including the prior year Warrior Run coal PPA monetization, the sale of AES Brazil and the 30% sell-down of AES, Ohio. Turning to Slide 14. Second quarter adjusted EPS increased 34% to $0.51 per share versus $0.38 in the prior year. In addition to the EBITDA growth drivers, also increased as a result of $185 million of higher U.S. renewable tax attributes. This strong growth was partially offset by higher parent interest expense and a higher adjusted tax rate. Next, I'll cover the performance drivers within each of our strategic business units on the next 4 slides. Beginning with our renewables SBU on Slide 15, the 56% increase in EBITDA was as expected and puts us well on our way to achieving our full year guidance of $890 million to $960 million. This was primarily driven by 3.2 gigawatts of new capacity brought online since Q2 2024 as well as the positive impacts from the cost reductions and scaling down of our development spending that we discussed on our fourth quarter call. This year, hydrology has normalized in Colombia, improving results versus the prior year. The net effect of moving Chile renewables to the renewables SBU this year was offset by the sale of our 5 gigawatt AES Brazil business. In the utilities SBU, lower adjusted…

Thank you, Steve. Before opening up the call to questions, I will share some closing thoughts. AES' business is resilient, and we are reaffirming all of our 2025 and longer-term financial and business objectives. We're on track to complete 3.2 gigawatts of construction in full year 2025 and have signed 2 gigawatts of new PPAs so far this year. Our backlog of 12 gigawatts of signed PPAs is either international or safe harbor and the majority will be completed by 2027. AES' Renewables adjusted EBITDA grew by 56% in the quarter as we delivered on our construction projects. At the same time, our balance sheet metrics are on track to meet all requirements to maintain our triple investment grade. Our resilience is the result of years of preparation of creating a domestic supply chain, a safe harbored backlog and pipeline and being the preferred provider of the fastest-growing market segment, namely data centers and corporate clients. AES has earned a reputation as the most reliable developer and builder of renewable projects as well as the most innovative company in our sector. We see ourselves as a provider of electric energy and capacity with the cost, shape and carbon intensity that our clients demand. AES will continue to deliver the solutions our customers need as we always have done in the past. For all of these reasons, we feel confident in our ability to deliver on our financial commitments through our guidance period and continue to show strong growth beyond. With that, I would ask the operator to open up the call for questions.

[Operator Instructions] Our first question today comes from Nick Campanella with Barclays.

This is Fei for Nick today, First, just wanted to touch on financial execution drivers. So on new project construction time line, so seeing 80% of the projects completed for the remaining 1.3 gigawatts. Can you talk about the project online timing for the rest of the year? And how does that affect EPS and EBITDA recognition? And also looking at longer-term guidance into a post-OBBB world, what are your latest thoughts and potential timing to roll forward into 2028 or even further as part of the multiyear guidance?

This is Ricardo. So I'll take the first part of your question with respect to the timing of the commissioning. Most of it will be, I would say, third quarter and a small portion in the fourth quarter of this year, I think it's important to highlight that 80% progress completion. We have all the equipment that we need on site, so we can provide full confidence in the remaining 1.3 gigawatt being commissioned by the end of the year.

Yes. This is Steve. Just on the second part, I would also add that most of our growth this year is coming from capacity that's already come online through last year in the first half of this year and the tax attributes related to what Ricardo mentioned, will be roughly split between the first -- between the third and fourth quarters. In terms of the longer-term guidance, we feel very good we're in our planning cycle. But based on what's come out in the new bill, and as Andres highlighted, we're very well positioned beyond 2027, given our safe harboring, given our domestic supply chain. So we see ourselves well on track in that period. And so we will give an update and expect to extend guidance in the February 25 call, as we normally do. But we feel very good about the company even beyond the 2027 time frame.

Nick, this is Andres. I would also add that we've always hit our construction targets that we've given. And other things like we have avoided public lands for our projects, and there's a high component of energy storage on this. So overall, we feel very good about hitting our targets.

Got it. That's very helpful. And I guess maybe switching gears, I understand, we've both seen the headlines about a potential acquisition of the company. And while I know you can't really opine directly on that. Could you maybe talk about how are you seeing the value of your underlying business currently versus where you traded 2, 3 years ago obviously, the renewables backdrop has changed significantly. But do you see private markets would still value your business higher than where the public market is currently? And if you were to pursue something for the whole company, what can be the regulatory hurdles required?

Yes. Look, Nick, what I would say is we have seen over the last couple of years, we feel our company has been undervalued, consistently undervalued. Just looking at today's call, look at the strength of our backlog, look at our execution, look at the clients that we have and also look at the flexibility that the company has. We really are an all-of-above company. I mean we always had a foot in gas as well. Over the last 5 years, we've done about 2 gigawatts of new gas plants. And we're doing a conversion from coal to gas, 1 gigawatt conversion from coal to gas now. And we have the possibility of doing gas as well. We have other sites. We have other things in development. So what I would say is that if you look at all those factors, we really are a company that's oriented to serving our customers. And we're not just a single technology company. So we'll combine the technologies with the tax incentives with the customer preferences that makes sense. But our primary aim is financial to really do the very best, create the most shareholder value that we can from this portfolio. So we've been executing. And therefore, if you look at what the company consists of and our performance, we feel that, yes, we've been undervalued over the last couple of years.

Our next question comes from Richard Sunderland with JPMorgan.

Can you hear me?

Yes, Richard.

Great. Looking at Slide 6 here, and I'm wondering how you think about the risk to safe harboring from the executive order and potential changes to guidelines. Is there anything specific to your safe harbor activities that gives you confidence in that outlook?

I'll give a high-level answer, and then I'll pass it to Ricardo. But I would say that, look, overall, we've been very looking at how to have a robust position. And this is sort of a philosophy we've asked. When you think about COVID, we're the only large developer that didn't postpone. Forget even abandoned any big projects as a result of COVID. So thinking about what potential changes could come, we have been very careful avoiding any public lands, for example. We have been -- if you think of our pipeline, a high component of that is energy storage or batteries plus energy storage. So overall, we're in a pretty robust position going into this. So on the specifics, I'm going to go ahead and pass it to Ricardo.

Richard, so let me start by saying that out of the 7.9 gigawatts of U.S. backlog. And I think just to repeat what we have in the Slide 16, 6 gigawatts will be placed in service by the end of the 2027, so by December 31, 2027. So they are not these projects, the 6 gigawatts are not exposed or subject to any modification by the new treasury guidance because by the law they have access to the tax attributes, and we can provide full confidence that we can bring and where these projects are in construction, and we will bring them online or place them in service before December 31, 2027. For the remaining 1.9 gigawatts, as Andres mentioned, nearly already have safe harbor protections under the treasury -- our existing treasury guidance, and in no event, we expect the new treasury guidance to be applied retroactively. With respect to the executive order, there is another element there, which relates to FEOC, which applies for projects that start construction on or after January 1, 2026, as all our projects already started construction or nearly all we have no exposure to this FEOC potential changes as part of this treasury guidance. And I should also say that as a first mover in terms of securing and supporting domestic or U.S. manufacturing for solar, wind and storage, we can comply even with the highest requirement or restriction for field even that they will not apply for the projects in our backlog.

Got it. And then turning to the utility side, we've seen sort of across the space, a lot of load updates on the quarter seems like pockets of the country and even broadly where there is a lot of acceleration of activity. I'm curious, given you've already picked up some benefits on that side. How you're seeing overall inbounds and interest into your service territories? Anything notable either on the quarter or on the horizon here on the load front at the utilities?

Look, there's strong interest and especially in our 2 utilities, I believe they're among the fastest growing in the country. We've signed about 2 gigawatts of data center -- additional data center demand, and then we would expect more. So yes, we're having inbounds. And yes, the demand continues to be strong. So again, across the board, we have positioned ourselves with that sector that's most robust and most rapidly growing.

Our next question comes from Michael Sullivan with Wolfe Research.

Maybe I missed this, but just any more detail you can give us on the PPAs that you signed in the quarter, whether it be location or resource type?

The information that we've given is that $650 million was with Meta. All of the $1.6 billion that we've signed is -- and again, this is since the last call, are with data center customers. And we'll provide more information going into the future. In general, we're somewhat skewed towards solar plus batteries overall. That's technologies were strongest in.

Okay. Fair enough. And then, yes, I mean, we've talked about this a bit, I think, on some of the calls, but just any further evolution in your thoughts in terms of new gas plant build for data centers have conversations progressed there at all? Or is there still mostly a skew towards renewable storage, at least for the near term?

So your question is if there is a conversation about gas bill to back up data centers. Look, as I sort of indicated, we will use all the technologies that best meet our customers' needs. So if our customers would want gas as part of the package, absolutely. And we have the capabilities. As I said, we've always been building gas plants. We have 10 gigawatts under operation today. So we feel very comfortable with that. But we're going to react to what our customers require.

Okay. Great. And then just a quick one on the utilities. Can you give us a sense of how much lag you're seeing in Ohio today and then what that can move to in a 3-year forward test year world?

Yes, this is Steve. So look, we're very happy with the new regulatory framework allowing the 3-year forward rate cases. So we have an existing rate case under the prior framework pending and we're expecting that settlement in the relative near term in the coming months and new rates to be in place Q1 of next year. But we're also moving forward with our plans to file under the new 3-year forward-looking rate structure likely later this year and would expect rates in 2027 under the new rate structure. So this is a really attractive structure for a utility with 3-year forward-looking. It significantly -- largely eliminates regulatory lag on our investment. And so I think it's good for utility, good for investing to provide the best service for our customers and to support the rapid low growth that Andres mentioned that is coming and to have very regular and quick return on those investments. So that's the timing, and we're looking forward to it.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

Excellent. So wonderful. I just wanted to follow up on these articles in recent weeks. I just -- can you elaborate a little bit about the situation. It was a bit ambiguous as to understand the strategic development here. What actions has the board taken did you all initiate this? Or has there been sort of an inbound formal bid from a third party? Just I get that it might be difficult to speak to specifically at times. But just in terms of what actions has the Board taken at this point with regards to reviewing the strategic direction of the company? And then separately, there's also been some articles out there about revisiting the stable of unicorns as you like to call it, Andres. I suppose Uplight specifically here. Can you speak a little bit more to asset sales within the plan? And within that, how that might fit against the broader strategic undertaking it in, too?

Sure. Well, Julien, as you know, regarding the first, AES never comments on rumors in public markets. So I won't. Regarding the second and Uplight specifically. We also don't comment about any potential sales that may be in progress. As you know, we've had some of the AES Next Unicorns. As part of our portfolio of potential asset sales, but we would only do them when we feel the price is right. So we monetize some affluence when we thought the price was right. And we will do so with some of the other ones. I think that some of the current developments make things like maximum potentially much more valuable because if there is a, let's say, a rush to complete projects by the 2027 end of year [ guidance ] if you can build a solar farm in half the time, that certainly becomes much more attractive. So that's, let's say, the one that we have a lot of interest in. We're very pleased by how it performed in the Bellefield 1, and now it has a bigger role in Bellefield 2. So that's about all I can say because obviously, as you well know, we can't comment on any potential asset sale until it actually occurs.

But you can't confirm necessarily that the Board has elected to do anything either.

As I said, we don't comment on any public market transactions and we never have.

Okay. If I can pivot just quickly back to the other side of this, you made allusion to it. On the EO backdrop, just what are your expectations with that -- I mean I get that -- whatever you can say on this thus far, but how would you set expectations about the EO specifically here? And then related, how are you thinking about the cadence of your development business? I know you already alluded that you provide specific targets at year end here, but how do you think about the overall trajectory of the business when you think about the back half of the decade and the implications that might come from Fed, EO or otherwise, right?

Yes. Look, what I can we don't really speculate too much on sort of what's going to come out of an executive order. But look, what we expect is there's a number of competing, let's say, desires here. One is the need to power data centers, what can be provided in the time frame needed to sort of win this competition international competition for AI dominance. So I think that's one. Second, there's a lot of jobs involved with building renewables. So obviously, they're indicating that they want a transition, but that transition has to be done in a feasible orderly fashion that meets all of the various needs for more energy, for AI dominance, for jobs, for growth, et cetera. So that's what I would expect is that all these factors are taken into consideration. Regarding the second question was...

How that fits in, right, regardless of the timing and cadence, like how would you broadly set expectations about the back half of this decade given that sort of -- whatever the timing is of that phase out given that phase out? How would you frame expectations initially?

Look, as we indicated, we continue to expect strong growth because it's not a question of the technology. It's the question of the ability to put together and supply clients with what they want. So as you know, we are not going after like megawatt goals. We're going after financial goals. And so we have a constraint that we're going to remain triple investment grade, and we're going to continue to pay a dividend. So within those confines, we will grow in an orderly fashion. And I must also say that if you have a sort of continuous growth and steady growth, it's much more cost efficient than if you have sort of spurts and valleys. So that's what we're going to do. I don't expect any post when these credits burn off, they will continue to grow at strong rates. And I would also add that we're the only large company which has international experience. So 30% of our new growth is outside of the U.S. And we have no tax credits. And quite frankly, we have higher margins. So it will basically be , as we said in the past, our U.S. business should look more like our international business. And it's very likely that it will also add a component of gas as well. And that's fine with us. We're capable of doing that. And as Steve also mentioned, the profile of cash, et cetera, is actually somewhat more favorable than using the tax credit. But of course, you have to use the tax credit because that's what makes the projects competitive for your clients. But in the absence of them, we're -- we've shown over the years, we're perfectly capable of making a very good business without tax credits.

Of course, absolutely, but you think you can continue to compound at higher levels than what you're doing for the time being when you said growth earlier.

Well, we're not going to give guidance outside of the period. But as we said on the call, we feel very confident that this company is going to continue to grow at strong rates. And that as the circumstances change, we will adapt to them. And I guess our experience in developing markets gives us an advantage because those markets regulations have tended to be much more volatile than the state. So for us, again, we feel we're in a very good position, and we have all the technologies we need. And as new technologies become available, say, something like enhanced geothermal, we've been dabbling in that, and we'll be ready to provide that for our customers, even SMRs, although I think that's quite a ways off. I think that's probably a decade off.

Yes. I would just add that, Julien, our backlog, as we showed in the slide is well protected even beyond 2027. And so we see that growth continuing to be strong. And even then, the demand is so robust will evolve technology, as Andre said, pricing will adapt in terms of what the net cost of projects becomes. And then as we described, we always maintain flexibility here. We don't necessarily need to build as many as if the investment is more concentrated without tax attributes in the renewable piece of the business. We also maintain the ability to sell down as we've done in the past. So because the EBITDA and cash yield will actually go up on a per megawatt basis, we can generate similar returns with, in fact, less megawatts. So we'll adapt, but we feel very good about how well positioned we are through the very long term.

Our next question today comes from Ryan Levine with Citi.

Good morning. How much cash flow is associated with Maximo and AS plan? And is there any color you can share on the financial metrics or commercial interest you're seeing with that asset in your portfolio?

Yes. Look, at this point, there's nothing in the plan from Maximo. In terms of commercial induce, we've had considerable amount of inbound, but our plan is this, right, currently, we're going to have about 4 of these operating, and we are I guess you would call it beta testing. We're getting more and more efficient. We're using union crews. Its main advantages is it can go faster with the same amount of people 2x to 3x faster. But I think what's very important is that in desert settings where you have limitations on the hours worked and again, picking up 65-pound solar panels, it requires very strong people to do that. So with Maximo, anybody can do this job. So you can work not 6 stars, you can work 18 hours. So it has the advantage of being more efficient, but also getting the projects done faster. So it would have a multiple of the efficiency of getting these things done, which means less working capital, but very important with the current guidelines, where you have a deadline that the project has to be in service could be very advantageous. So we should go to forward or a couple of dozen next year, and we will use those internally. And so in terms of selling them to third parties, that's probably 2027 or beyond when we have that. So to give you sort of a time frame, which is similar to what we did with batteries. For several years, we put them on our own fleet and only after that, did we start to commercialize them. And there was a lot of learning, but we'll get a much better price once this product is perfected.

And then in the prepared remarks, the company's gas generation billback capability was highlighted. Just to clarify, is the effort that you were speaking to more around back of generation for data center build-out? Or was that a more broad effort that the company is pursuing?

Okay. We are converting a coal plant right now to gas, that's about 1.1 gigawatts as in Indiana. We just completed 670-megawatt combined cycle plant in Panama. And in 2020, we brought online Southland, which was 1.2 gigawatts of combined cycle gas plants. So we've always been continuing building gas plants. What I did mention is that if data centers request them, we're capable of building them, and we have the capability of expanding sites, for example, to do it very quickly. So the point is we don't count it as part of our pipeline, we don't count, for example, the 1.1 gigawatt conversion as part of our pipeline. We've basically centered that on renewals, but we have the capabilities of doing more gas for example, in other places as well, even the Dominican Republic, there's possibilities of doing more gas. So we have that in our arsenal. It's a question of what the -- what our clients demand.

Okay. And then just in terms of the renewables industry from a higher level, do you see consolidation given the policy uncertainty at the U.S. federal level? And does that create opportunity for your stand-alone business to acquire some assets or high-graded your portfolio?

Sure. I mean, obviously, I think it will be more difficult for the smaller, less capitalized developers in this environment. So I certainly think that there will be opportunities. We have been doing this. If you think of over the past 5 years, we've been rolling up smaller developers into AES. So I think there'll be continued opportunities like that. We'll also have the opportunity to buy advanced stage development projects. And we'll have to weigh whether it's more profitable to, say, develop a particular project we have in our pipeline or acquire it. and then finish it. So Bellefield is a good example of that. It's one of our best projects, and it was 2 gigawatts, which was a, let's say, medium stage acquisition.

Our next question comes from David Arcaro with Morgan Stanley.

I was wondering what has the bookings trajectory been in July post the OBBB. I'm just wondering if there's any evidence of a pickup in activity now that the level of clarity has improved for the industry.

So -- this is Ricardo. Thanks, David, for the question. So what we are seeing is, as Andres and also Steve mentioned, the demand is extremely strong. We see our customers, of course, trying to lock in PPAs as fast as they can possibly do it. Why is that? Because of course, there is an intent of still getting some benefits from the tax incentives. We do have 4 gigawatts of projects in our pipeline. So not yet contracted that, of course, are very attractive for our customers. But also, as Andres mentioned, we are very, very focused on the big tech customer segment, large unprofitable PPAs. So we are, of course, balancing between, of course, the desire of our customers to move these projects alone and signed PPAs fast to make sure that we are disciplined in terms of having all the permits, all the equipment and also ensuring that we can I would say, capitalized on the gray work that we have done, safe harbor in these projects and the fact that they are very unique in a market that will adjust for the removal of the tax incentives going forward. So we are seeing strong demand. They are trying to look PPA prices as soon as possible. So I think we feel very confident in our ability to sign more PPAs in the year to go. So stay tuned, and we will be sharing more as we sign those contracts.

Great. Yes. And it was solid bookings, obviously, from data center customers. Great to see that acceleration. I was wondering if there's any inflection in those data center -- in that data center renewables demand, anything that might have kind of sparked the industry recently? Is that an inflection that you saw in the quarter, specifically with that customer set?

Not at all. I think what Andres mentioned is very, very important, renewables offer the faster time to power price certainty because even though, of course, it will adjust for the removal of the tax incentive, this is fixed price for 20 years so that our customers, of course, appreciate. They don't have the volatility of any fuel associated to that generation. And third, renewables on a megawatt hour basis is still more competitive even without tax incentives than any other source of electricity. So there is no -- we don't see any drop in demand or the interest of our customers, quite the opposite.

At this time, we have no further questions. And so I'll turn the call back over to Susan Harcourt for closing comments.

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. Thank you, and have a nice day.

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.