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Operator: Hello, everybody, and welcome to The AES Corporation Q1 2025 Financial Review Call. My name is Emily, and I’ll be moderating your call today. [Operator Instructions]. I will now hand the call over to Susan Harcourt, Vice President of Investor Relations to begin. Susan, please go ahead.

Susan Harcourt: Thank you, operator. Good morning, and welcome to our first 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 Andrés Gluski, our President and Chief Executive Officer; Steve Coughlin, our Chief Financial Officer; Ricardo Falú, our Chief Operating Officer; and other senior members of our management team. With that, I will turn the call over to Andrés.

Andrés Gluski: Good morning, everyone, and thank you for joining our first quarter 2025 financial review call. Today, I’m very pleased to reaffirm both our 2025 guidance and long-term growth rate targets, which reflect our strong execution to date as well as the resilience of our business overall. I will discuss this in more detail and provide an update on the robust growth program at our U.S. utilities. Following my remarks, Steve Coughlin, our CFO, will provide additional color on our financial performance and outlook. Beginning on Slide 3 with our first quarter results. Our financial performance was in line with our expectations with adjusted EBITDA of 591 million and adjusted EPS of $0.27. We completed the construction of 643 megawatts and signed or were awarded 443 megawatts of new PPAs, bringing our backlog to 11.7 gigawatts.

We have achieved our asset sale proceeds target for the year, including the sale of a minority stake in our global insurance company, AGIC, for 450 million. Now turning to the resilience of our business model and portfolio. Our execution is proceeding as planned and we expect to hit all of our financial metrics for the year. We have positioned ourselves for success even in the face of uncertainty around tariffs, changes to the Inflation Reduction Act or potential recession. Our business model is based on long-term contracted generation with creditworthy offtakers as well as growth in our U.S. regulated utilities. Our contracting, financing and supply chain strategies have all been designed to minimize the impact of economic conditions, including inflation, interest rates, energy prices and tariffs.

As a result, we have clear visibility into our future financial performance. I’ll first discuss the performance of our renewable business and then address the ways we have ensured that this business is resilient to macroeconomic and policy shifts. Turning to Slide 4. A major driver of our renewables EBITDA growth this year is the approximately 3 gigawatts of new projects we expect to bring online. I’m pleased to say that we are fully on track with more than 600 megawatts already completed, including the 250-megawatt Morris Solar project in Missouri serving Microsoft. Our remaining projects under construction for the year are now approximately 80% complete. Our 1 gigawatt Bellefield 1 project, which includes 500 megawatts of solar and 500 megawatts of storage, is virtually complete and we will be fully operational this summer.

This is the first phase of what will be a 2 gigawatt project and the largest solar plus storage plant ever built in the United States, all of which is contracted with Amazon. Moving on to Slide 5. Our supply chain strategy provides us strong protections from any current or potential future tariffs as well as from the impact of inflation. Of the 7 gigawatts in our backlog scheduled to come online in the U.S. between 2025 and 2027, nearly all of the CapEx is protected with zero exposure to tariffs as the equipment is already in the U.S., in transit or contracted to be produced domestically. Our tariff exposure is limited to a small quantity of batteries that are being imported from Korea for projects coming online in 2026 with a maximum potential exposure of 50 million, which we are actively working to further mitigate.

This represents just 0.3% of the total U.S. CapEx and is well within the normal project contingency. I would like to emphasize that our U.S. supply chain protects us from any potential tariffs that could be announced, including reciprocal tariffs. We also serve our corporate customers outside the U.S. where we continue to see substantial demand. Contracts that we are signing outside the U.S. are benefiting from lower equipment prices as the result of the increase in international equipment supply, with solar panels typically one-third the cost in Chile versus the U.S. Turning to Slide 6. Our business is also well protected from possible changes to U.S. renewable policy for several reasons. First, we are the top electricity provider to premier corporate clients, including data center customers that require capacity that can come online relatively quickly.

We have signed agreements for 9.5 gigawatts with data center companies, more than anyone else in the sector. There are a few others in the industry who can develop, build and operate the projects we offer, which are often large, geographically diverse and with customized commercial structures. Furthermore, with our extensive history of working with large corporate customers, our development projects are tailored to meet their specific needs. We believe our customers will have strong demand for renewables in any scenario. Through the end of the decade, Bloomberg New Energy Finance sees increased electricity demand requiring at least 425 gigawatts of new capacity. While AES is committed to serving our customers with an all of the above strategy, including new gas generation, we see renewables as the primary source of new energy to serve this demand for the following reasons.

First, they offer the fastest time to power, given their short construction period and advanced permitting and interconnection queue positions. Second, the fact that they are a low-cost source of power, particularly considering the rapidly rising cost of gas turbines and long lead times. And third, the price stability that they offer customers once contracted, unlike thermal power, which is subject to fluctuating fuel prices. In addition, roughly one-third of our backlog is in international markets where we develop, build and operate renewable projects without tax credits, usually with higher returns than in the U.S. In the absence of tax credit, projects have higher net capital needs but PPA prices are also higher to account for this funding structure.

In these cases, we earn higher EBITDA per megawatt and are able to achieve our financial targets with fewer projects. Turning to Slide 7. Another reason for our confidence in the resilience of our business is that nearly our entire U.S. backlog has Safe Harbor protections. Once a project starts construction or incurs 5% of the cost of materials, the project has Safe Harbor protections and has a period of four years to be placed in service and begin receiving tax credits. For example, any project that reaches start of construction milestones in 2025 is Safe Harbored through 2029. Turning to Slide 8. We’re also resilient to any economic downturn. Our business is heavily contracted with approximately two-thirds of our EBITDA coming from long-term contracted generation, essentially all of which are take-or-pay and not tied to underlying demand conditions.

Looking to the future, nearly all of our growth through 2027 is already secured through our 11.7-gigawatt backlog of signed long-term contracts. At the same time we sign our PPAs, we contractually lock in all major capital costs, EPC arrangements and hedge our long-term financing. This approach gives us clear line of sight to our future EBITDA. We have also achieved our asset sale proceeds target for the year with the sale of a minority interest in our captive insurance company, and we have closed the sell-down of AES Ohio. Furthermore, with our March debt issuance, we have successfully completed all financings needed to address our 2025 debt maturities, and we have hedged 100% of our benchmark interest rate exposure for all corporate financings through 2027.

Next, I’ll discuss the robust growth program we’re undertaking at our U.S. utilities on Slide 9. We are executing on the largest investment program in the history of both AES Indiana and AES Ohio as we work to improve customer reliability and support economic development. This year, we’re on track to invest approximately $1.4 billion across the two utilities to support areas such as hardening the distribution network, smart grid, new generation and transmission buildout for data centers. We signed agreements for 2.1 gigawatts of new data centers in AES Ohio’s service territory. We are beginning construction on new transmission to serve this load. This summer, we’ll be breaking ground on the $500 million transmission investment needed to serve a new Amazon data center in Fayette County.

Additionally, last month, we completed the sale of a 30% stake in AES Ohio for $544 million to CDPQ, a global investment partner that also owns 30% of AES Indiana. This partnership helped support capital requirements for their substantial growth programs while also strengthening our balance sheet. Now turning to AES Indiana. We’re continuing to invest in new generation to support our customers with affordable and reliable power. In March, we brought online the Pipe County Energy Storage project, which includes 200 megawatts of installed capacity and 800 megawatt hours of dispatchable energy, the largest operational battery project in MISO. We continue to make progress on the Petersburg Energy Center, a 250-megawatt solar and 180 megawatt hour energy storage facility, which we expect to be operational by the end of the year.

And in April, we received final regulatory approval for the 170-megawatt cross-buying solar plus storage project, which we expect to bring online in 2027. With that, I would now like to turn the call over to our CFO, Steve Coughlin.

Steve Coughlin: Thank you, Andrés, and good morning, everyone. Today, I will discuss our first quarter results, our 2025 full year guidance and our parent capital allocation plan. Turning to Slide 11. Adjusted EBITDA was $591 million in the first quarter versus $640 million a year ago. This decline was anticipated in our guidance and was primarily driven by prior year revenues from the accelerated monetization of the Warrior Run PPA and the sale of our 5-gigawatt AES Brazil business but partially offset by growth in our renewables and utilities businesses. Turning to Slide 12. Adjusted EPS for the quarter was $0.27 versus $0.50 last year and was also in line with our expectations. Drivers include the prior year Warrior Run PPA monetization, the timing of U.S. renewables tax attribute recognition, higher parent interest and the prior year tax benefit associated with our transition to a more U.S.-oriented holding company structure.

This was partially offset by higher contributions from our utilities SBU. I’ll cover the performance of our SBUs or strategic business units on the next four slides. Beginning with our renewables SBU on Slide 13. Higher EBITDA of approximately 45% year-over-year was driven primarily by contributions from new projects, which includes projects brought online over the prior four quarters. In addition, the renewables segment now includes all of our renewables in Chile which were a part of the energy infrastructure SBU in prior years. This change was offset by the EBITDA impact from the sale of AES Brazil in the fourth quarter of last year. With this quarter’s results, we are fully on track to achieve our full year renewables SBU guidance of $890 million to $960 million.

Our construction program is proceeding on schedule. Cost savings measures have been implemented and we have already seen hydrological conditions in Colombia normalize year-to-date. In other words, our main segment drivers are greatly derisked, and we’re well on our way to achieving 60% renewables growth year-over-year. Turning to Slide 14. Higher adjusted PTC at our utilities SBU was mostly driven by tax attributes from the completion of the Pipe County Energy Storage project, new rates implemented in Indiana in May of last year, demand growth and favorable weather in the U.S. Lower EBITDA at our energy infrastructure SBU primarily reflects prior year revenues recognized from the accelerated monetization of the coal PPA at our Warrior Run plant as well as Chile renewables moving to the renewables segment.

Finally, lower EBITDA at our new energy technologies SBU reflects lower contributions from Fluence in the first quarter. Now turning to our guidance beginning on Slide 17. We are reaffirming our 2025 adjusted EBITDA guidance of 2.65 billion to 2.85 billion. We continue to see strong growth in our renewables SBU and expect our utilities businesses to grow approximately 7% this year despite the sell-down of AES Ohio. The cost savings actions we announced on our February call have already been implemented. We expect the 150 million cost savings in 2025 will primarily benefit the second half of the year, and we remain on track to achieve a full run rate of over 300 million of cost savings next year. We are also reaffirming our 2025 adjusted EPS guidance of $2.10 to $2.26.

As you can see on Slide 18, we expect growth in the three remaining quarters of this year to be driven by adjusted EBITDA growth in renewables and utilities and monetization of tax attributes on new renewables projects, partially offset by higher interest and a higher adjusted tax rate. Now to our 2025 parent capital allocation plan on Slide 19. Sources reflect approximately 2.7 billion of total discretionary cash, including 1.2 billion of parent free cash flow, which represents more than an 8% increase versus 2024. We also expect 700 million of planned parent debt issuance and closed the 450 million sell-down of a minority interest in our global insurance business earlier this week. Our captive global insurance business is a valuable asset within the AES portfolio that consistently produces attractive cash flow while managing property and business interruption risk within our operating portfolio.

This structured transaction allows us to monetize a minority portion of this valuable business to support growth capital for renewables and utilities businesses. With this transaction, we have achieved our entire asset sale target for 2025. On the right-hand side, you can see our planned use of capital. We will return approximately 500 million to shareholders this year, reflecting the 2% dividend increase announced last December. We also plan to invest approximately 1.8 billion toward new growth and have already repaid roughly 400 million of subsidiary debt. With the sell-down of a minority interest in AES Ohio at the beginning of April, we now have CDPQ as a 30% partner in both of our U.S. utilities. This partnership is another example of how we use private capital to help fund growth and reduce parent investment requirements into our subsidiaries.

Finally, turning to Slide 20. Our credit metrics are progressing in line with our expectations, benefiting from the actions we’ve taken since the beginning of this year. With the sell-down of our global insurance business, we have locked in our asset sales proceeds for the year. The sell-down of AES Ohio and subsequent debt paydown enabled S&P’s recent one and two-notch upgrades for DPO Inc. and AES Ohio, respectively. We have also refinanced this year’s parent debt maturity and have already fully hedged the benchmark on all expected parent financing through 2027. Additionally, we implemented cost efficiencies and resized our development business to generate over 300 million in annual savings by next year. These actions provide us with a fully self-funded plan through 2027.

In summary, I am very pleased with our results this quarter, which were fully in line with the guidance we gave in February. We expect significant growth in the year to go that will come from projects that have already been brought online but which are still ramping to their full EBITDA, rate base investments that have already been made and cost reduction actions already implemented. I am confident we will achieve our guidance regardless of changes in the economic environment or changes in policy due to our focus on regulated utilities and long-term contracted generation, which has minimal volume interest rate for foreign currency exposure. I look forward to providing an update on our progress on our second quarter call. With that, I’ll turn the call back over to Andrés.

Andrés Gluski: Thank you, Steve. In summary, our long-term contracted business model continues to demonstrate its resilience to tariffs, economic policies and business cycles. Our first quarter results are in line with our expectations, and we are reaffirming our 2025 guidance and long-term growth rate targets. Demand from our core corporate customers remains very strong, and we’re seeing no slowdown in the energy needs of hyperscalers in any scenario. As a result of our strategy to be a first mover in creating a domestic supply chain and working with existing suppliers to onshore imported equipment, the tariff exposure on our 11.7-gigawatt backlog is de minimis. Similarly, our construction program of 3.2 gigawatts this year is on track and well advanced.

We have completed construction of 643 megawatts and we are 80% complete for the remaining 2.6 gigawatts, including 99% complete on the 1 gigawatt of our Bellefield project, which will be the largest solar plus storage project in the U.S. Our two utilities are among the fastest growing in the country, and we continue to make progress on attracting new data centers to our service territory. And lastly, we have already completed all of our major asset sales and financings for the year, solidifying our commitment to self-funding through our long-term guidance period. With that, I would like to open up the call for questions.

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Julien Dumoulin-Smith with Jefferies. Please go ahead, Julien.

Julien Dumoulin-Smith: Hi, good morning, team. Thank you guys very much. I appreciate the time and the opportunity here. Nicely done on this insurance transaction. Actually, if I can just start off a little bit of housekeeping there. How do you think about that transaction just in terms of the prospective EBITDA impact, just when you think about the financials here? I mean again, innovative idea in how to raise kind of equity indirectly, right, from private capital as you say?

Andrés Gluski: Good morning, Julien. I’m going to pass that question to Steve.

Steve Coughlin: Yes, good morning, Julien. The EBITDA impact, expect in the 25 million to 30 million range. So overall, given that we’ve raised 450 million, we’re reinvesting that in returns, 13%, 14%, 15%. It’s very accretive for us so very pleased. This was an opportunity that we have seen quite a while ago. It had been part of the universe of potential asset sales. And so we’ve anticipated for some time, we did include it in our guidance in February. And it’s effectively the low-cost equity financing that supports growth while also meeting our credit goal. So very happy to complete this early this year.

Julien Dumoulin-Smith: Awesome. Yes. Nicely done, Steve, I got to say. Neat idea. If I can turn more substantively, right, just to clarify your earlier comments. First, just on the tariff exposure, is it principally that you’ve got a recovery from your suppliers, i.e., they are taking the risk when you guys provide this 0.3% that effectively the risk burden is effectively put on the vast majority of your suppliers versus going back to your customers? I just wanted to clarify that. And then related, just given the 400-and-change megawatts of origination this quarter given the backdrop today, would you say that this is kind of what we should be expecting for this year? Or could you see some sort of more meaningful uptick? I’m just trying to get a sense of what that cadence should be against setting expectations for further down the line?

Andrés Gluski: So I’ll have Ricardo answer the first question and then I’ll take the second.

Ricardo Falú: Thank you, Julien. I think let me provide a bit of more context on our supply chain. Three years ago, we have made the decision of basically building a reliable and U.S.A. made supply chain. And guided by that sort of decision, we implemented three actions. The first one was that we entered into strategic partnerships with suppliers with manufacturing capacity outside of China. That was the first action. The second action, we were a first mover, as Andrés mentioned, in supporting U.S. manufacturing to secure solar batteries and wind components. And third, to bridge the gap as local manufacturing ramps up, we accelerated the import of all the equipment coming from abroad required to support our backlog through 2027.

And as a result of these actions, apart from the small quantity of batteries that Andrés mentioned that these are for a few projects coming online in 2026, we have no impact on tariff for our 2025-2027 backlog. I think with respect to who sort of bear the exposure, these contracts are with a Korean supplier for a very few projects. Of course, this tariff were not in place at the time we signed the contract and what we are doing, the $50 million represent the full exposure to be shared between the parties. And of course, the first action, as Andrés mentioned, is to actively reduce that exposure, which we’ve been so far very successful and for the remaining impact to share it evenly. So we expect the overall impact to be well below that $50 million that is the total exposure that Andrés mentioned.

Other than that contract, we have no exposure to tariffs, yes.

Andrés Gluski: Yes. I’d like to clarify that what we did was we imported all of the equipment, the vast majority of it. So we have all that equipment that we need, for example for 2025 with the exception that we pointed out already in the U.S. and most of it on site. And we have a lot of the equipment for 2026 that’s imported as well. So in 2026, we expect to shift over to domestic supply. So when we say that the exposure is de minimis, we really got ahead of this. Now I will remind you this is what we did in 2020 as well. In 2020, we achieved all of our targets and we’re the only large developer who did not abandon or a significant delay any large project and we intend to continue that track record. Now getting your question about the cadence of PPA signings.

As we’ve been saying, look, we’re concentrating on fewer, larger projects that are also more financially attractive. So the 400 megawatts is not a cadence that you should expect for every quarter. We are in final negotiations of a number of large projects. We expect it, 4 gigawatts roughly, that we have talked about prior to this year, to hit sort of the three year target. We had talked about of 14 to 17 gigawatts. So we remain on track. And we’ve always said these are lumpy so it’s not like we’re doing a lot of small projects. We’re doing a few large ones and sometimes they happen in a quarter or they happen in the next quarter or they come together. So there’s nothing to be read in the 400 megawatts.

Julien Dumoulin-Smith: Got it. All right. Excellent guys. Thank you. I’ll leave it there.

Ricardo Falú : All right. Thanks, Julien.

Operator: Thank you. Our next question comes from Nick Campanella with Barclays. Please go ahead, Nick.

Nick Campanella: Hi. Good morning, everyone. Thanks for taking my questions. And I appreciate all the color. I just wanted to come back to the insurance sale quickly. So I know you kind of disclosed the Class B dividends are like $145 million to $198 million. Is that like a yearly number or is that a cumulative number? And I guess if you hit that call option in 2030 to 2035, what is that strike price? And how should we kind of think of the cost of financing here that you just raised versus, I guess, deploying future CapEx at 13% to 15% returns? Maybe you could just unpack that.

Steve Coughlin: Yes. Nick, it’s Steve. So those numbers are based on the five year, the first five year target distribution. And so this would be the aggregate amount at that five year call date that needs to get met. And that’s very much in line with a fairly conservative case on what this insurance business delivers. Keep in mind, this is a business that is — it’s captive but it has a reinsurance behind it. So we have a very predictable max amount of losses and then the reinsurance kicks in. So this was structured very conservatively that even in the event of max losses, we feel very comfortable servicing this financial structure. In terms of the cost of this, I would think about it as roughly in line with like a junior subordinated debt issuance at the parent.

And given that this is getting equity treatment that effectively looks like a low-cost equity financing that is quite accretive. It will have target payments in the range of about $37 million to $40 million per year to the counterparty.

Nick Campanella: Okay, that’s helpful. Appreciate that. And I’ll try not to butcher it but just the Cochrane buyout that you disclosed in the 10-Q. Can you just give us a sense of what you’re purchasing? And how much you paid for it, either on like a multiple basis or cash and just the rationale behind that transaction?

Steve Coughlin: Yes. Look, I mean, this is an asset that we already own and operate. We have a minority partner that was looking to exit. So what we’re doing is we’re buying up the 40% minority and taking nearly complete ownership of the asset. It’s very valuable. It’s contracted well into the next decade, serving key customers for us in Chile. And the valuation was at a very low multiple so it’s quite accretive immediately this year and beyond. So we’re pleased with it. It’s one of the assets that we had already guided that would be extended beyond 2027. So it’s no additional new capacity, just taking advantage of an attractive financial return on owning the entire thing as opposed to just the share that we had.

Nick Campanella: Okay, thank you.

Steve Coughlin: All right. Thanks, Nick.

Operator: Thank you. The next question comes from David Arcaro with Morgan Stanley. Please go ahead David.

David Arcaro: Hi. Thanks so much. Good morning.

Steve Coughlin: Good morning, David.

David Arcaro: I was wondering on the AGIC sale, just one other follow-up there. You sold a minority stake. I’m just wondering, is there any strategic reason that you want to retain control in the remaining stake there? Or could that be a consideration for future asset sales out in the rest of the program, the financing plans going forward as…?

Andrés Gluski: Yes. No, we want to maintain our control of this asset. And as Steve said, it’s — the financial metrics are very conservative and we’re coming in with considerable margin on this. So we do want to maintain it. It’s been very successful. We’ve set this up about 15, 20 years ago. It was an independent business, it’s a unicorn. So it’s been very successful, lowered our insurance costs and improved the quality of our reinsurers.

David Arcaro: Okay, great. And I was wondering if you could comment on just what you’re seeing in terms of latest renewable demand trends. Has there been any pull forward ahead of potential IRA changes here or any just general change in customer demand levels that you’re seeing?

Andrés Gluski: Yes, great question. Look, what we are seeing is continued strong demand. We’re not seeing any sort of temporal shifts as a result. So our data center customers continued strong demand. I think the key word is time to power. And that’s why we mentioned that certainly, for the next five years, the predominance of this is going to be renewables because it’s the fastest to power. It’s also very cost effective. And so it’s more sort of you can combine this with gas, in many cases, to reach the optimal solution. I think there’s too much discussion about the technology and not really what the customer wants. So we combine ways of producing energy in a way that satisfies our customers. So look, we’re not seeing any pull forward.

We are seeing, I would say, some of the contracts that we’re signing today that they have provisions for, say, changes in law, changes in tariffs, etcetera, to take that into account. Now for our backlog, as I said before, we have imported the materials or have domestic supply. We have the EPC and we have the financing. So all that’s locked in.

David Arcaro: Okay, sounds good. Thank you.

Andrés Gluski: Thanks, David.

Operator: Thank you. Our next question comes from Durgesh Chopra with Evercore. Please go ahead, Durgesh.

Durgesh Chopra: Thank you. Good morning, team. Thanks for giving me time. Steve, congrats on this transaction. Maybe just a little bit more detail. You talked about the cash distributions being conservative. Can you just frame for us the $40 million or so average distributions a year? What is that as a percentage of total cash generated for that business?

Steve Coughlin: Yes, it’s roughly around — depending on the year, 35%, 40% I would say, in terms of this business reliably generates about $100 million of cash, thereabouts, even with typical losses. And that includes some amortization of the instruments so this is self-amortizing over the full 20-year life. It’s nothing like these convertible portfolio financings that you’ve heard about with some other yieldcos that were not amortizing and had a significant economic ownership flip. This doesn’t have that kind of change. We have a call right at year five. And otherwise, there’s no incentive to have to call it. It continues along the same economics for the full 20-year potential period. So it’s priced, as I said, like a junior parent note and gives us access to cheap, what I call, cheap equity capital.

And then we can continue to retain this so long as it’s — unless we had a better option down the road that’s lower cost. But this one is a good way to monetize an asset that I think is perhaps underappreciated in the value that it generates. It’s been in our disclosures around the distributions to the parent from this asset in the past, so you can see that. And this is capital that will be put to work to generate mid-teens returns. So I think it looks quite good.

Durgesh Chopra: Got it. Thank you for that clarity. Accretive transaction there. Just digging on the financing topic, there’s been a lot of discussion around transferability. Some legislation recently proposed or is probably doesn’t get much traction. But just in terms of thinking about risks, can you talk about like in an event the transferability is eliminated, do you go back to tax equity and perhaps even frame for us what percentage of your plan is being provided by cash financing, is being provided by transferability? Thank you.

Steve Coughlin: Yes, absolutely, Durgesh. So look, first of all, transferability has only been around for a little over two years when the IRA was passed in 2022. It has been very good for the industry as it’s opened up a broader participation in the market for monetizing tax value. And it is typically a little bit more efficient in transferring most of the tax benefit savings on to customers, just there’s less friction in these types of transactions. But that said, for the IRA, we did tax equity. The majority of what we continue to do is still through tax equity partnerships. And in fact, we continue to form the partnerships anyway because we need to monetize the tax depreciation to maximize the opportunity even when we are doing transfers.

So we can continue to do the tax equity partnerships for all of our future projects if this were removed. We don’t think it will be because we think it goes with the tax credits in terms of getting the most benefit of the tax credit to the cost of the end consumer of the energy. And then effectively, the cash benefit to AES is the same. So we bridge the tax financing with debt during construction, as I walked through on the February call. And then we immediately, when the tax value comes in, either from the transfer counterparty or from the tax equity partner, we immediately monetize that at the place and service date and pay down a significant portion of the debt, typically more than 50% at that point. So you have a significant deleveraging from this.

The fundamental cash and credit profile is really exactly the same. So I think it’s been good, a lot more for some smaller developers and to sort of democratize the participation in the market. But as a large-scale developer with deep relationships with sophisticated tax equity partners, we still feel very comfortable that we can monetize all of the tax value that we create with the tax equity venue if needed.

Durgesh Chopra: Thanks, Steve. Appreciate that discussion. Just real quick, sorry, this is my third question I understand and realize. Just the hydrogen project that was canceled in Texas, are we still pursuing other customers for contracted the power generation that I believe it was over 1 gig?

Andrés Gluski: The answer is yes. I mean, that was a very attractive asset of development. It’s in — it’s all on private land on 1 farm and it’s very well located for the grid and for anything else. So yes, we’re continuing to pursue it. It’s part of our pipeline, so yes.

Durgesh Chopra: Thank you, Andrés.

Andrés Gluski: Thank you, Durgesh.

Operator: Thank you. Our next question comes from Michael Sullivan with Wolfe Research. Please go ahead.

Michael Sullivan: Hi, good morning.

Steve Coughlin: Good morning, Michael.

Michael Sullivan: Wanted to just ask on where we stand on the longer-term asset sale target. Are you still shooting for that 3.5 billion? Where are we against that? And what else are you looking at for potential sales?

Steve Coughlin: Yes, this is Steve. So no, we — so with respect to the 3.5 billion, we’re at 3.4 billion, so we’re right almost there to the finish line on that target. We did talk about getting to 800 million to 1.2 billion on the February call from ’25 to ’27. So with this sale, and that’s not including the Ohio sell-down, which went to paying down debt. This was referring to proceeds up to the parent. With this insurance sell-down, we’re halfway, roughly there, close to halfway on that target. What’s remaining is we have the — in terms of proceeds, the Vietnam sale. We have some other asset sales in the thermal portfolio that are on a smaller scale. We have partnerships of operating assets. We’ve done partnerships with our LNG portfolio.

As you’ve seen, those can and maybe extended. We’ve done partnerships, sell-downs at attractive low-cost capital of our renewable operating portfolios. So those remain an option. And our technology portfolio. At this point, Fluence is not at a value that we would tap that. It is significantly undervalued, but we do — we are optimistic down the road that, that’s a potential. So we’re not counting on that. We do have other assets in that portfolio like Uplight that we’ve talked about that may be a candidate. So the universe is larger than what’s remaining. What’s remaining is only roughly 500 million in that target through ’27. And so I feel extremely comfortable that we’ll be able to execute on that between now and 2027 across the range of things that I mentioned.

Michael Sullivan: Okay, great. That’s helpful. And back to the IRA discussion here. Do you all have any view on kind of when this starts to take shape in the Reconciliation Bill? Feels like things starting to come to a head a little bit. And then also just specifically on transferability, your view on whether a Safe Harbor would cover you on that even in a scenario where that were to go away?

Andrés Gluski: Okay, let’s see. I spent some time up in the Hill with key senators and congressmen. What I would say is that I do expect in sort of a first draft to come out of the House and Ways and Means Committee, and that’s to start the discussion. So that’s certainly, I don’t think that’s the final point. That was made clear to us. I do think that there is — what I heard was a very pragmatic approach. One was the importance of, I would say, reliability in a sense that something like — if you look at Safe Harboring, I think that everybody I spoke to said that, that’s a very important component to maintain because that’s really the credibility of U.S. laws or, let’s say, U.S. programs. So I feel very good about that. I think regarding the IRA, it’s a question of — certainly going to be addressed certain aspects of it.

I think that you might have an earlier sunset of it. I would say very likely, actually, that’s where the majority of the savings that they would score would come from. But having said all that, I think that at the end, it’s going to be quite pragmatic. There are hundreds of thousands of jobs depending on this. A lot of people are going to be going into elections in ’26. And you don’t want to have a jump in unemployment in rural areas where a lot of this is getting done. And you also have the tax revenues that this is going to generate. So my feeling on this is that we will have something relatively early. That’s not the final — whatever comes out, it’s not final. When can reconciliation done? Take it with a huge grain of salt, people think it’s before the August recess, that people will want to have this done before they go out of town.

So that’s more or less the time frame. But I think the discussions were — that I had, I think, were very encouraging about thinking about what’s good for the country and what can realistically be done.

Michael Sullivan: Appreciate that color. Thank you.

Andrés Gluski: Thank you.

Operator: Thank you. The next question comes from Richard Sunderland with JPMorgan. Please go ahead, Richard.

Richard Sunderland: Hi, good morning.

Steve Coughlin: Good morning, Richard.

Richard Sunderland: I just wanted to follow up on transferability one more time. On an agency metric basis, what would be the impact to your FFO without transferability and how do you expect the agencies to treat that?

Steve Coughlin: So the transferability, as I said, Rich, is fundamentally the same cash and credit profile. The difference is the transfer credits do go through operating cash flow. So there’s no — in terms of S&P and Fitch, it really has no impact to their focus on the parent free cash flow, whereas this comes in at the subsidiary level and pays down debt primarily. And so it does get captured in the Moody’s metric. So I think we will need to work with Moody’s to ensure that this is well understood. I think they do understand it that it’s fundamentally no change. The cash comes in when the project is placed in service, whether it comes from a transfer or from a tax equity partner and the debt gets paid down. So I think practically, it has no impact.

And if we got to that point, we would, of course, work with Moody’s as we have and they’ve been very constructive in understanding how renewables works, including the adjustments that they made in the last update that they gave. So I don’t see it as a negative at all for the credit profile.

Richard Sunderland: Got it. That was very clear. So presumably on a Moody’s basis, this would push out the improvement you’ve called out for ’26, but you also expect Moody’s to look through the impacts, given what you laid out earlier on the value through tax equities being the same?

Steve Coughlin: I mean, look, I can’t speak for Moody’s, but look it’s very logical and we’re talking about geography issue on the cash flow statement. So I have a hard time being that logic won’t prevail there, that fundamentally the credit profile is exactly the same.

Richard Sunderland: Understood. And then maybe I’ll just follow up with one more. I mean, I think there’s been a lot of attention on transferability and maybe some fears out there that this first draft on the IRA could have a lot of negative headlines, then we migrate some more reasonable middle ground. Do you think transferability is something that may come out in that initial draft and then goes back in? Any thoughts on sort of the magnitude of that headline risk initially versus where things might ultimately shake out in your earlier commentary?

Andrés Gluski: No. What I would say is that there are two sort of groups. One is uses of capital and there’s one that’s sort of be more blunt. I think again, there’s going to be a compromise. So I really have no insight in terms of what the initial language can be. But it’s clear, bills always come out to start a discussion so it has to come from the house and then it has to be resolved with the senate and you have to have this reconciliation. So I just think that anything that comes out now is the start and it’s not the ending point. But I also — again, from my discussions, I think they were very constructive, very, very positive in general, but I think people understand the issues, which is what’s most important. Look, the most important thing is, among other things, we want two things, energy dominance and you want to — with the AI race.

Both of those require a lot of renewable energy, well, actually a lot of energy now. If you think about additional gas plants, if we order a new gas turbine today, the waiting period is between three to five years to say nothing that is not permitted and it’s not an interconnection queue. So if you come out with something that was very negative, let’s say, to new energy, well, you’re forfeiting two of the most important goals of the administration. So that’s why I felt that there was clarity in terms of cause and effect and what it’s going to take to have energy dominant and what is going to — it’s a question also of time frame. So this is a question that must be resolved in the next four, five years. And we have to be pragmatic what we can get accomplished in that time period.

So I feel that, that is understood. So I’m, let’s say, reasonably optimistic about where it’s going to end up. Who knows the political path or headlines? I can’t know. Your guess is as good as mine.

Richard Sunderland: Perfect. Thanks for the time today.

Andrés Gluski: Thank you. Thanks, Rich.

Operator: Thank you. Our final question today comes from Anthony Crowdell with Mizuho. Please go ahead, Anthony.

Anthony Crowdell: Hi, good morning. Thanks for squeezing me in. Most of my questions Richard’s taken care of in front of me. Just quickly on Ohio, some legislation passed earlier, I think this week, multiyear rate plans, but also maybe removal of OVEC revenues. Just curious the impact for AES Ohio and does it change your plan on rate filings?

Ricardo Falú: Thank you so much. This is Ricardo. So I will start saying that overall the impact of the bill is net positive for us, while on one side eliminates the ESP. It’s going to be now replaced by a 3-year forward-looking distribution rate case with annual true-up, which is a more constructive regulatory framework in a growing business such as AES Ohio. In addition, the language clearly states that the current ESP4 features will be extended from August 2026, which was the original expiration date to May of 2027. So, this will give us enough time to have the new rates coming from this 3-year forward-looking framework in place. I think this is very, very constructive. It eliminates regulatory lags, so again, very, very positive for a growing business such as AES Ohio.

I think in terms of our timing for filing the distribution rate case, more likely it’s going to be by the end of this year. With respect to OVEC, the impact is estimated to be between $0 million and $10 million. Why 0? Because it depends very much on the financial performance of the asset or assets, I should say, because we are talking about 2.3 gigawatt to coal assets that provide capacity to PJM and we are seeing a significant increase in capacity prices where you may recall it were like around $29 and now $270 per megawatt per day. So it’s going to be within that sort of range, $0 million to $10 million depending on the financial performance and capacity prices in PJM. And as I said, all-in-all, net positive and I think this regulatory framework with a three-year forward-looking is extremely constructive for AES Ohio.

Anthony Crowdell: Great. Thanks for taking my questions.

Ricardo Falú: Thank you, Anthony.

Operator: Thank you. Those are all the questions we have for today and so I’ll hand the call back over to Susan Harcourt for closing remarks.

Susan Harcourt: 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.

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