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    AES Corp (AES)

    Business Description

    AES is a diversified power generation and utility company organized into four strategic business units (SBUs) based on technology: Renewables, Utilities, Energy Infrastructure, and New Energy Technologies. The company operates two main lines of business: generation and utilities, involving owning and operating power plants to generate and sell power, as well as distributing and selling electricity to end-user customers in various sectors . AES emphasizes its strategic focus on renewable energy and innovative technologies, indicating significant investment in these areas for future growth .

    1. Utilities - Comprises regulated utilities such as AES Indiana, AES Ohio, and AES El Salvador, which generate, purchase, distribute, transmit, and sell electricity to end-user customers.
    2. Renewables - Includes solar, wind, energy storage, and hydro generation facilities, focusing on sustainable energy solutions.
    3. Energy Infrastructure - Involves natural gas, LNG, coal, pet coke, diesel, and oil generation facilities, including operations in Chile.
    4. New Energy Technologies - Focuses on green hydrogen initiatives and investments in companies like Fluence, Uplight, and 5B, which are involved in innovative energy technologies.

    Q2 2024 Summary

    Initial Price$18.07April 1, 2024
    Final Price$17.44July 1, 2024
    Price Change$-0.63
    % Change-3.49%

    What went well

    • AES anticipates over 50% increase in peak load at its AES Ohio and AES Indiana utilities due to data center growth, leading to significant investments in transmission and generation assets and further increasing rate base growth.
    • Credit metrics are improving, with expectations to surpass last year's year-end figures, positioning AES for potential future credit rating upgrades.
    • AES is poised to benefit from the Inflation Reduction Act's domestic content bonuses, already meeting criteria for wind projects, expecting battery projects to meet requirements starting in 2025, and solar panels by 2026, which could enhance project returns.

    What went wrong

    • AES's renewable operations have been negatively impacted by weather-related disruptions, such as the forced outage at their 1-gigawatt Chivor hydro plant in Colombia due to record flooding, leading to reduced EBITDA this year.
    • AES experienced lower wind resources in Brazil, which also negatively affected EBITDA, indicating susceptibility of their renewable assets to variable natural conditions.
    • There is uncertainty about AES's ability to fully retain benefits from favorable market conditions or policies, as the division of gains with customers in PPA pricing depends on specific market circumstances, potentially impacting returns.

    Q&A Summary

    1. Utility Load Growth
      Q: What's the breakdown of the 3 GW utility load opportunity in Indiana and Ohio, and impact on CapEx?
      A: AES is seeing significant load growth opportunities in their utilities, driven by data centers. While specifics are still being finalized, this represents upside to their capital plans. They expect to include more details in next year's guidance, with the funding plan remaining unchanged due to strong asset sales and partnership capital. , ,

    2. Credit Metrics Improvement
      Q: Can you update us on credit metrics and FFO to debt ratio outlook?
      A: AES's credit metrics are improving and are expected to be higher than last year's year-end levels. They have a threshold FFO to debt ratio of 20%, with current metrics providing cushion above that. They foresee possible mid-BBB ratings in a matter of years, as the quality of cash flows improves with long-term contracts and asset sales. , ,

    3. Returns on Renewable Projects
      Q: Is there upside potential to returns given supply and demand dynamics?
      A: AES is focusing on maximizing the quality of megawatts over quantity, optimizing their renewable pipeline to maximize value. They've increased average project returns to the mid-teens and are optimistic that market conditions may allow for further return enhancements, although they are satisfied with current levels. ,

    4. Supply Chain and Time to Power
      Q: How secure is AES's domestic supply chain for 2026, considering tariffs?
      A: AES feels very confident in their ability to execute and deliver their U.S. backlog. They have secured necessary materials for this year, 2024, and the vast majority for 2025. Agreements with domestic suppliers starting in 2026 ensure compliance with domestic content requirements under the IRA, mitigating tariff risks.

    5. Financing Plan for Utility Growth
      Q: How will you finance the upside in utility CapEx due to load growth?
      A: AES doesn't expect changes to their funding plan, despite the anticipated utility growth. Successful asset sales and partnership capital provide the flexibility to invest in utility growth within their existing funding plan through 2027. ,

    6. Domestic Content Bonus Impact
      Q: When will your projects be eligible for the domestic content bonus, and implications for returns?
      A: AES's wind projects already meet domestic content criteria, with solar projects expected to qualify starting in 2026 and batteries in 2025. This qualifies them for a 10% adder across the entire capital cost of projects, enhancing returns. The benefit may be shared with customers depending on market conditions. ,

    7. Ohio Generation and Load Growth
      Q: Any appetite to own regulated generation in Ohio given load growth?
      A: AES currently has no appetite for owning generation in Ohio directly but sees opportunities for their renewables team. They are confident in meeting the increased demand over time without changing their current approach. ,

    8. Hyperscalers' Renewable Energy Demand
      Q: Do hyperscalers' renewable goals affect their power contracts?
      A: Hyperscalers prefer renewable power to meet their sustainability goals and require additionality, though they may use non-renewable power as a last resort. AES works closely with them to provide tailored renewable solutions, including colocation and innovative technologies, ensuring alignment with hyperscalers' environmental objectives. , , ,

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    US and Utilities SBU--------
    South America SBU--------
    - Andes SBU--------
    - Brazil SBU--------
    MCAC SBU--------
    Eurasia SBU--------
    - Europe SBU--------
    - Asia SBU--------
    Corporate and Other27402942138334033
    Eliminations(52)(61)(44)-(216)(54)(59)(55)
    Renewables SBU4955417085952,339619596726
    Utilities SBU9718528807923,495873896961
    Energy Infrastructure SBU1,7241,6541,8611,5976,8361,6141,4691,623
    New Energy Technologies SBU7410176001
    - Regulated Revenue--------
    - Non-Regulated Revenue--------
    Total Revenue3,2393,0273,4342,96812,6683,0852,9423,289
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    United States----4,439---
    Chile----1,932---
    Dominican Republic----1,400---
    El Salvador----935---
    Colombia----706---
    Brazil----697---
    Panama----644---
    Mexico----536---
    Bulgaria----528---
    Argentina----407---
    Vietnam----344---
    Jordan----97---
    Other Non-U.S.----3---
    Total Non-U.S. Revenue----8,229---
    US and Utilities SBU--------
    South America SBU--------
    MCAC SBU--------
    Eurasia SBU--------
    Corporate and Other--------
    Eliminations--------
    Total Revenue3,2393,0273,4342,96812,6683,0852,9423,289
    KPIs - Metric / QuarterFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Adjusted EBITDA with Tax Attributes ($ million)6416071,0081,167-8638431,168
    PPA backlog (GW)11.93213.17013.112.3-12.712.612.7
    GW under construction5.6275.3895.7615.1-5.85.14.0

    Executive Team

    NamePositionStart DateShort Bio
    Stephen CoughlinExecutive Vice President & Chief Financial OfficerOctober 2021Stephen Coughlin, 52 years old, has served as Executive Vice President and Chief Financial Officer at AES since October 2021. He previously led AES's Corporate Strategy and Financial Planning teams and was CEO of Fluence. He joined AES in 2007 and holds degrees from the University of Virginia and UC Berkeley .
    Bernerd Da SantosExecutive Vice President & President of the Renewables SBUJune 2023Bernerd Da Santos, 60 years old, has served as Executive Vice President and President of the Renewables SBU since June 2023. He has held several positions at AES, including COO and EVP. He joined AES in 2000 and holds multiple degrees, including an MBA from Universidad José Maria Vargas .
    Ricardo Manuel FalúExecutive Vice President & Chief Operating OfficerFebruary 2024Ricardo Manuel Falú, 44 years old, has served as Executive Vice President and Chief Operating Officer at AES since February 2024. He joined AES in 2003 and has held various positions, including President of the Andes region. He holds a CPA degree from Universidad Nacional de Salta and an Executive MBA from IAE Business School .
    Paul L. FreedmanExecutive Vice President, General Counsel & Corporate SecretaryFebruary 2021Paul L. Freedman, 53 years old, has served as Executive Vice President, General Counsel, and Corporate Secretary at AES since February 2021. He has been with AES since 2007 and previously worked at the U.S. Agency for International Development. He holds a B.A. from Columbia University and a J.D. from Georgetown University .
    Andrés R. GluskiPresident & Chief Executive OfficerSeptember 2011Andrés R. Gluski has been serving as the President and Chief Executive Officer of AES since September 2011. Under his leadership, AES has become a leader in clean technologies. He has held various senior roles at AES since 2000, including EVP and COO .
    Tish MendozaExecutive Vice President & Chief Human Resources OfficerFebruary 2021Tish Mendoza, 48 years old, has served as Executive Vice President and Chief Human Resources Officer at AES since February 2021. She joined AES in 2011 and has held various HR leadership roles. She holds a bachelor's degree in Business Administration and Human Resources and has earned certificates in Leadership and HR Management .

    Questions to Ask Management

    1. With the expected 50%+ load growth in AES Indiana and AES Ohio, how confident are you in your ability to supply the necessary generation capacity, given the planned coal-to-gas conversions and reliance on renewables, and what challenges do you foresee in meeting this demand?
    2. Considering the rise in generative AI and the significant demand for data centers, how is AES planning to secure critical components, such as domestically produced solar panels and batteries, to meet domestic content requirements and avoid potential new tariffs?
    3. How will the current lower interest rate environment impact the profitability of your future projects, especially those yet to be built, and are there opportunities for incremental benefits from reduced financing costs?
    4. You have reported that you are nearly two-thirds of the way to achieving your $3.5 billion asset sale target by 2027; can you provide more details on which specific non-core assets or business segments you are considering for future sales, and how this aligns with your overall strategic focus?
    5. Could you elaborate on the timeline and strategies for your projects to qualify for the domestic content bonus tax credits, specifically addressing the implications for returns in both your solar and storage projects, and how any potential delays might affect your financial projections?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateJuly 7, 2010
    End Date/DurationNo expiration date
    Total additional amount$500 million
    Remaining authorization amount$264 million (as of 2024-12-21)
    DetailsAuthorized extension in December 2010

    Past Guidance

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted EBITDA with Tax Attributes: $3.6 billion to $4 billion, including contributions from new renewables projects and rate base growth at U.S. utilities, offset by asset sales .
      2. Adjusted EPS: $1.87 to $1.97, a 9% increase year-over-year, driven by renewables and utilities, offset by higher parent interest and asset sales .
      3. Parent Free Cash Flow: $1.05 billion to $1.15 billion .
      4. Net Asset Sale Proceeds: $900 million to $1.1 billion .
      5. Parent Debt Increase: Approximately $1 billion .
      6. Investment in New Growth: $2.6 billion, with 85% for renewables and utility rate base, over 90% in the U.S. .
      7. Dividend Allocation: $500 million, reflecting a 4% increase .
      8. Long-term Growth Rates: Adjusted EBITDA growth of 5% to 7%, and adjusted EPS growth of 7% to 9% through 2027 .
      9. Asset Sales Target: $3.5 billion by 2027 .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted EBITDA with Tax Attributes: $3.6 billion to $4 billion .
      2. Adjusted EBITDA: $2.6 billion to $2.9 billion .
      3. Adjusted EPS: $1.87 to $1.97 .
      4. Adjusted Tax Rate: 23% to 25%, excluding tax credit transfers .
      5. Parent Capital Allocation: $3 billion total discretionary cash, including $1.1 billion parent free cash flow, $900 million to $1.1 billion from asset sales, and $900 million to $1 billion planned parent debt issuance .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted EBITDA with Tax Attributes: Top half of $3.6 billion to $4 billion range .
      2. Adjusted EPS: Upper half of $1.87 to $1.97 range .
      3. Parent Capital Allocation: $500 million return to shareholders, $2.4 billion to $2.7 billion investment in growth, 85% for renewables and utilities .
      4. Asset Sale Target: $3.5 billion from 2023 to 2027, with $2.2 billion signed or closed since 2023 .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: N/A
    • Guidance: The documents do not contain information about the Q3 2024 earnings call for AES, so specific guidance metrics from that call are unavailable.