AES - Earnings Call - Q3 2025

Executive Summary

• AES delivered Q3 2025 total revenue of $3.351B and Adjusted EPS of $0.75; revenue was above S&P Global consensus while EPS was slightly below, driven by timing of renewables tax attribute recognition and mix effects. Revenue estimate $3.224B* vs actual $3.351B; EPS estimate $0.77* vs actual $0.75.
• Management reaffirmed full-year 2025 guidance: Adjusted EBITDA $2.65–$2.85B, Adjusted EPS $2.10–$2.26, and Adjusted EBITDA with Tax Attributes $3.95–$4.35B; long-term annualized growth targets (EBITDA 5%–7% through 2027; EPS 7%–9% through 2027) maintained.
• Strategic execution remains robust: 2.9 GW completed YTD, on track for 3.2 GW in 2025; YTD PPAs of 2.2 GW, including 1.6 GW with data centers; backlog at 11.1 GW with 5 GW under construction.
• Utilities catalysts: AES Ohio’s unanimous settlement (~$168M annual revenue increase, ~10% ROE) with rates potentially effective by November; AES Indiana partial settlement, IRP filed; rate-based investment of ~$1.3B over the past year supporting growth.
• Stock reaction catalysts: reaffirmed guidance, strong renewables growth, data center PPA traction, and regulatory settlements; management emphasized self-funded plan through 2027 and no need for equity issuance, supporting confidence in the medium-term trajectory.

What Went Well and What Went Wrong

What Went Well

• Renewables growth: Adjusted EBITDA up nearly 50% YTD, supported by 3 GW placed in service since Q3 2024 and robust supply chain execution.
• Data center traction: 2.2 GW of PPAs signed YTD, including 1.6 GW with hyperscalers; backlog includes 4 GW with hyperscaler customers, half under construction, providing a clear line of sight to growth.
• Regulatory progress: “AES Ohio reached a unanimous settlement resolving its distribution rate review… AES Indiana reached a partial settlement agreement… and filed a 20-year IRP”. Management added, “The settlement includes an annual revenue increase of approximately $168 million. A ROE of nearly 10%”.

What Went Wrong

• EPS vs consensus: Adjusted EPS of $0.75 came in modestly below consensus $0.77*, primarily due to lower realized tax attributes at the Renewables SBU and lower other/interest income; partially offset by lower adjusted tax rate and higher retail margin.
• Energy Infrastructure headwinds: Lower generation and prior-year Warrior Run PPA monetization created year-over-year pressure; sale of AES Brasil also reduced contributions.
• Non-GAAP adjustments and timing: Day-one losses on sales-type leases, unrealized derivatives/FX, and impairments drove volatility in GAAP results intra-year, emphasizing the importance of Adjusted metrics for underlying performance.

Transcript

Operator (participant)

Hello everyone, and thank you for joining the AES Corporation's Q3 2025 financial review call. My name is Claire, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one. If you change your mind, please press star followed by two. I will now hand over to Susan Harcourt, Vice President of Investor Relations from AES, to begin. Please go ahead.

Susan Harcourt (VP of Investor Relations)

Thank you, Operator. Good morning and welcome to our third 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 (President and CEO)

Good morning, everyone, and thank you for joining our third quarter 2025 financial review call. Today, I will address our year-to-date progress on our financial and strategic objectives and speak to key developments in our renewables and utility businesses. Following my remarks, Steve Coughlin, our CFO, will further discuss our financial performance and outlook. First, I am pleased to reaffirm our full year 2025 guidance and long-term growth rates, including adjusted EBITDA, adjusted EPS, and parent free cash flow. We are executing according to our plan, and we are well-positioned going into 2026. We remain fully on track with our credit ratings and have received credit opinions from all three major agencies, confirming our investment-grade rating with stable outlook, including from Moody's in September.

Second, we are confident that we will sign 4 GW of new PPAs this year as we deliver the energy solutions that our customers need at attractive returns. Year-to-date, we have signed 2.2 GW and expect to sign at least an additional 1.8 GW before the end of the year, as we are in advanced negotiations on several large projects. Similarly, we're on schedule to complete 3.2 GW of construction projects this year, with 2.9 GW already completed year-to-date. An additional 4.8 GW of our 11.1 GW backlog is under construction and expected to be completed through 2027. We're also repowering the 1.2 GW of natural gas at AES Indiana, which is scheduled to be operational next year. This significant construction program provides a clear line of sight to EBITDA growth through our guidance period and beyond.

Turning to slide five, we have seen a 46% increase in our renewables EBITDA year-to-date, driven primarily from the organic growth of new projects coming online and the maturing of our U.S. renewables businesses. By year-end, the installed capacity of our U.S. business will be almost 60% larger than it was just two years ago. We are seeing projects with higher returns come online as we benefit from substantial economies of scale in purchasing, construction, and operation. These benefits are particularly evident as the average size of our projects has increased by over 50% over the past five years. Turning to slide six, we're also benefiting from the completion of projects serving data centers that we have signed over the last few years. Of 8.2 GW, 4.2 GW are in operation, and 4 GW are in our backlog.

Nearly half of these remaining 4 GW are under construction and will be added to our fleet in the next 18 months. Additionally, and leveraging our development capabilities, this quarter we signed a development transfer agreement, or DTA, with a large data center customer to provide them with powered land for a data center site adjacent to two of our power projects. In the past, we have signed DTAs with utility customers to develop and transfer power projects, but this is our first involving the transfer of a data center site. We will provide more details on this powered land solution in the future as we continue completing milestones and are ready to announce it with the customer. Moving to slide seven, we continue to see very strong demand across the sector, with our customers overwhelmingly focused on time to power.

Given the overall scarcity of ready-to-build projects, AES is well-positioned to meet the urgent need for energy due to our advanced pipeline of development projects, robust domestic supply chain with no fiat exposure, and secured tax credit position. As a reminder, our 7.5 GW U.S. backlog is entirely safe harbored, and in our pipeline, we have an additional 4 GW with safe harbor protections. We also have line of sight to safe harbor an additional 3 GW-4 GW before July 4th, 2026, enabling us to bring online projects with tax credits through 2030. As we move toward the end of the decade, our safe harbor projects that qualify for tax credits will give us a growing competitive advantage. This will help us serve our customers with reliable and low-cost power. Moving to our U.S.

Utilities, beginning on slide eight, we are focused on our core mission of serving our customers with affordable and reliable power as we address the increased demand that we are seeing in our service territories. Across Indiana and Ohio, we're among the lowest cost providers in each state, a position we expect to maintain following the resolution of our active rate cases. Turning to Indiana, slide nine. Earlier this year, we filed for a rate review with the Indiana Utility Regulatory Commission. This rate case represents our first using a forward-looking test year, bringing us in line with the rest of the electric utilities in Indiana. We are committed to maintaining bill affordability, and we have been disciplined in holding our operations and maintenance costs flat for the last five years. As such, our rate increase request is less than the cumulative impact of inflation since our last rate adjustment.

I am pleased to report that in October, we filed a partial settlement agreement, which included parties such as the City of Indianapolis. We expect the final order in Q2 of next year. We still expect our residential rates to be at least 15% lower than the average rates in the state. Furthermore, we're making excellent progress on our generation program at AES Indiana, which includes the construction of new facilities to replace aging infrastructure and improve system reliability. Earlier this year, we brought online a 200 MW Pike County Project, the largest energy storage facility in MISO, and we're on track to complete an additional 295 MW of new capacity by the end of this year. Moving to slide 10, last week, we filed our Integrated Resource Plan with the IURC. Laying out a 20-year outlook and short-term action plan for our generation portfolio.

Our IRP submission evaluated scenarios with and without new data center load as we see the potential for significant new demand in our service territory, with new load coming online towards the end of the decade. As we work with data center customers, we are committed to ensuring that new load will lower costs for all existing customers as we spread fixed costs across a larger customer base. We will announce these arrangements with more specificity in due course. Turning to AES Ohio on slide 11, where we have 2.1 GW of signed data center agreement and expect more to come. I should note that in Ohio, our data center-related investments are for transmission and are supported by FERC formula rates with no regulatory lag. By 2027, we expect transmission to represent 40% of our total rate base. We're now also in the final stages of our distribution rate review.

Since our last call, we filed a unanimous settlement, including all customer classes and PUCO staff. The settlement includes an annual revenue increase of approximately $168 million. A ROE of nearly 10%. We expect to have our final order in the very near future, with rates effective as early as this month. Looking ahead, we plan to file our next rate review next week as we work towards a transition in Ohio's regulatory framework away from the existing ESP model. In this filing, we will be using forward-looking test years from 2027-2029 as we seek to further optimize our current rate structure and reduce regulatory lag. With that, I would now like to turn the call over to our CFO, Steve Coughlin.

Stephen Coughlin (EVP and CFO)

Thank you, Andrés, and good morning, everyone. Today, I will discuss our third quarter results and our 2025 guidance and parent capital allocation. First, turning to adjusted EBITDA on slide 13. Third quarter adjusted EBITDA was $830 million versus $698 million a year ago. This was driven by significant growth from new renewables projects, rate-based investment at our U.S. utilities, and continued progress on our cost savings program announced on the fourth quarter call. We have already realized the majority of the $150 million in cost savings for this year, and we are on track to achieve a $300 million annual run rate in 2026. These drivers were partially offset by the sale of AES Brazil and the sell downs of AES Ohio and our global insurance business. Turning to slide 14. Adjusted EPS increased to $0.75 per share versus $0.71 in the prior year.

Drivers were similar to adjusted EBITDA, partially offset by higher depreciation and interest expense and lower renewable tax attribute recognition, mainly due to timing. We also benefited from a slightly lower adjusted tax rate. Next, I'll cover the performance drivers within each of our strategic business units. Beginning with our renewables SBU on slide 15. Our strong growth was primarily driven by the 3 GW of new capacity brought online since Q3 2024. Our results were also driven by the continued benefit from cost reductions and scaling down of development spending as our pipeline has continued to mature. Lastly, the net effect of moving Chile renewables to the renewables SBU this year was more than offset by the sale of our 5 GW AES Brazil business.

Turning to slide 16, we've made excellent progress so far this year toward achieving our full year renewables EBITDA guidance and have already exceeded our full year 2024 EBITDA in just the first three quarters of 2025. We expect to continue this momentum in the year to go, driven by our expanded operating fleet and full realization of our cost savings objective. As the size of our operating portfolio increases while our development spending and overhead decline, our operating margins are significantly improving. In addition, hydro conditions in Colombia have normalized compared to last year, and we expect to realize the largest benefit in our fourth quarter results.

Turning back to our third quarter results on slide 17, in the utilities SBU, higher adjusted Pre-Tax Contribution, or PTC, in the quarter was mostly driven by the $1.3 billion of rate-based investments we have made over the previous four quarters to improve reliability and customer experience. This was partially offset by the 30% sell down of AES Ohio that closed in April. At our energy infrastructure SBU, higher EBITDA primarily reflects our acquisition of the remaining ownership in the Cochrane Coal Plant, cost savings, and the commencement of operations at our Gatun Gas Plant last year. This was partially offset by the Chile renewable assets moving to our renewable segment in 2025. Finally, EBITDA at our new energy technologies SBU was relatively flat versus a year ago, with no material drivers.

Turning to our 2025 EBITDA guidance on slide 20, we have already achieved more than 3/4 of the midpoint of our guidance in the year to date, and I am highly confident in our full year range of $2.65 billion-$2.85 billion. Growth in the year to go will be primarily driven by the continued strong increase in contributions from new renewables projects, rate-based investment in our U.S. utilities, normalized results at our Colombian hydro assets, and the full realization of our $150 million cost savings target. Looking at the right-hand side, we are also reaffirming our adjusted EPS guidance of $2.10-$2.26. In addition to the drivers of adjusted EBITDA, we expect slightly higher tax credit recognition on new renewables projects, partially offset by higher interest expense as a result of new debt for our growth investments and a slightly higher adjusted tax rate.

Looking beyond this year, on slide 21, we're also reaffirming our 5%-7% long-term growth rate for adjusted EBITDA through 2027 from the midpoint of guidance we gave at our investor day in 2023. Notably, we expect a strong step up over the next two years, with our growth rate increasing to the low teens next year. We expect to have significantly less drag from asset sales and coal retirements going forward, and instead, our overall results will be driven by new EBITDA contributions from our 11.1 GW renewables backlog and 11% utilities rate-based growth. It is important to highlight that our long-term guidance through 2027 understates the actual run rate earnings power of our portfolio. Looking beyond 2027, we expect to earn an incremental $400 million of run rate EBITDA.

This is from projects that we expect to be either still under construction at the end of 2027 or that will come online during 2027 and will contribute a full year of EBITDA in 2028. This $400 million does not require any additional project development or PPA signings, but represents the full realization of investments we'll have already made by the end of our guidance period. Now let's turn to our 2025 parent capital allocation plan on slide 22. Sources reflect approximately $2.7 billion of total discretionary cash, including achieving the upper half of our $1.15 billion-$1.25 billion parent free cash flow target. We achieved our asset sale target with the sell down of our global insurance business in the second quarter, and we expect to borrow an additional $500 million at the parent to continue funding growth.

On the right-hand side, you can see our planned use of capital. We will return more than $500 million of dividends to shareholders this year while investing approximately $1.8 billion toward new growth, primarily in the renewables and utilities businesses. We have also repaid approximately $400 million of subsidiary debt. Our balance sheet and cash flow generation remains strong, consistent with our investment grade credit ratings. Our consolidated Moody's FFO to net debt metric is tracking ahead of the agreed path of 10%-11% in 2025, and we are confident in achieving the 12% target by the end of 2026. In summary, we've demonstrated the high growth of our renewables and utilities businesses and our excellent track record of completing projects on time and on budget.

Since we initiated our long-term plan in 2023, we brought 10 GW of projects online and signed another 12 GW while investing nearly $4 billion in the rate base at our U.S. utilities. We are extremely well positioned to achieve our 2025 guidance in long-term growth rates through 2027, and our plan remains largely de-risked. I look forward to meeting with many of you next week at the EEI Financial Conference. With that, I'll turn the call back over to Andrés.

Andrés Gluski (President and CEO)

Thank you, Steve. Before we open the call for questions, I want to reiterate how pleased I am with our execution this year. We remain firmly on track to achieve all of our strategic and financial objectives, and we have made significant progress in growing our renewables business, as evidenced by the 46% increase in renewables EBITDA year to date. The primary driver of this EBITDA growth is the 3 GW of new capacity completed over the last 12 months.

Our construction program provides a clear line of sight to continued EBITDA growth through our guidance period and beyond. These results demonstrate the strength and resilience of our strategy and our ability to bring new projects online efficiently and at scale. As a diversified power company, we are well positioned to deliver the technology and solutions our customers need, whether through renewables, our utilities, or our energy infrastructure business.

Our Safe Harbor pipeline, a robust domestic supply chain, and deep customer relationships give us a competitive advantage as we meet the growing demand for reliable, low-cost power. I am confident that our continued focus on execution will drive value for our shareholders as we move into 2026 and beyond. With that, I'd like to ask the operator to open up the call for questions.

Operator (participant)

Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Nick Campanella from Barclays. Your line is now open. Please go ahead.

Nicholas Campanella (Senior Equity Research Analyst)

Hey, good morning. Thanks for taking my question and for all the updates.

Stephen Coughlin (EVP and CFO)

Good morning, Nick.

Nicholas Campanella (Senior Equity Research Analyst)

You know, maybe, hey, morning. Just, you know, I heard your comments on the 5%-7% long-term growth on EBITDA, very confident in that through 2027, as well as this disclosure about the $400 million of EBITDA beyond 2027. You know, maybe just with the asset sales progressing, are you trying to communicate that, you know, you're going to be above this range as we look out to 2027 and then more within the range as we look to 2026? Or maybe can you just walk through some of the moving pieces that we should kind of consider there?

Stephen Coughlin (EVP and CFO)

Thank you, Nick. It's Steve. No, we're reaffirming the 5%-7%. In 2027, when we referenced the $400 million in our remarks, we're talking about the fact that we expect to have projects coming online in 2027 and projects that are still in construction at the end of 2027. You know, and this is primarily from things that are already in the backlog that will be yielding an incremental $400 million of EBITDA beyond 2027, so in 2028 and in 2029 on an annualized basis. The capital that we have provided includes the, you know, investment and the debt for that, but obviously not the EBITDA since these are projects that would not be completed, or at least not full year, contributing in 2027. That was the point there.

You know, we're really confident in our 5%-7% guidance, through the period. You know, as you know, we have really de-risked the business. We have the long-term contracted generation is where it's coming from as well as the attractive returns in the utilities. You know, we over the long term, you know, see this as a very solid plan to achieve that target. Note that we have 11.1 GW of projects in our backlog, which is roughly three to four years of built-in growth already. The other driver is utility rate-based growth, which at roughly 11% as we've guided to, and there's upside to that with the new data center load that's in advanced negotiations that we've been talking about.

You know, we feel really good about the 5%-7%. The other thing to note is that, you know, the energy infrastructure where we've had more of the, you know, coal retirements, more of the, you know, asset sales, that's really starting to level off. When you look at the overall growth of AES, it's no longer somewhat offset by that decline in energy infrastructure to that same degree. We see a very, you know, favorable path here to the five to seven and then even beyond that.

Nicholas Campanella (Senior Equity Research Analyst)

Okay, that's helpful. You know, maybe just a comment on parent funding going forward. As you look towards accelerating growth in renewables further, just what's balance sheet capacity look at this point? At this point, how should we think about the need for additional equity in any new plan, or if you plan to just fully mitigate that and there shouldn't be any equity? Maybe you can just comment on how you're thinking about it. I think there's a January parent maturity for next year. Thanks.

Stephen Coughlin (EVP and CFO)

Yeah, thanks, Nick. Look, our top priority is continuing to strengthen our balance sheet, and keeping our investment grade ratings strong. All right, that's the focus throughout our planning and our decision making. It's not about GW growth, but rather profitable growth with attractive returns that helps us achieve our balance sheet and our financial objectives. You know, keep in mind we've already done a lot here to support the balance sheet. We removed $2 billion of cash through the actions we took earlier this year, reducing overhead, resizing our development efforts, driving efficiencies throughout the organization. We've also successfully executed sell downs that have helped delever the business. For example, in AES Ohio, the sell down to CDPQ was largely used to reduce debt in the Ohio Holdco.

In renewables, we're focused on pursuing, you know, fewer but larger new projects with returns, you know, in the upper half of our 12%-15% guidance range. On top of all that, our EBITDA has reached an inflection point, as you can see with the renewables segment, which has already grown 46% this year. It'll likely be around 50% by the end of the year. We see the strong EBITDA, strong growth in FFO, and we see ourselves on a path to, you know, keep the balance sheet healthy. We are self-funded through 2027. We see an ability to extend that self-funding even beyond that point, and we do not have any plans to issue equity in this horizon.

Nicholas Campanella (Senior Equity Research Analyst)

Thank you.

Stephen Coughlin (EVP and CFO)

Thank you, Nick.

Operator (participant)

Thank you. Our next question comes from David Arcaro from Morgan Stanley. Your line is now open. Please go ahead.

David Arcaro (Executive Director of Equity Research)

Hey, thank you. Good morning.

Stephen Coughlin (EVP and CFO)

Good morning, Dave.

David Arcaro (Executive Director of Equity Research)

I was wondering, if you could comment on, good morning. I was wondering if you could comment on whether you've seen an acceleration in demand, following the Treasury guidance a couple of months ago, and generally what you're seeing from both the data center interest, data center industry, and their interest level in renewables. We'd be curious if you could just maybe put that in context of the slower bookings and contracting activity that it looks like you experienced this past quarter.

Andrés Gluski (President and CEO)

Sure. Look, we see very strong interest from, our data centers and our corporate customers. I would say that, you know, in our case, two things. One is we've always said this is lumpy, and so we're doing fewer projects, larger projects. There is, you know, no reason to expect that these are going to be evenly distributed, around four quarters. We feel confident we'll hit our 4 GW. Now, having said that, I think not all GW are, made the same or equal. We are more than focusing on a number of GW. What we're focusing on is the quality of those GW. You know, we have a pipeline of safe harbor, projects, and we want to make the most value from those projects. What really counts is how profitable are the projects you're doing.

As we have said, our projects are on average 50% larger than they were five years ago. We are going for bigger projects, more profitable projects. We are trending towards the upper end of our IRR guidance. You know, we feel very comfortable about that. You know, the demand is there. The question is, how do you optimize that asset you have, what I would call as safe harbor projects? Look, there is interest beyond that horizon as well. Very strong demand for renewables because, look, that is what can get built in this window. There can be talk about nuclear or other technologies. Those take years to build.

What is going to meet the majority of the demand, this year it's probably going to be 90% is renewables and batteries, and it very likely will be next year as well. We're, you know, very strong demand from our clients, and we're working very well with them.

David Arcaro (Executive Director of Equity Research)

Excellent. Yeah, that makes sense. I appreciate that extra color there. Separately, I guess we're seeing indications that storage, battery storage, is being incorporated into more data center plans. You know, I'm curious, what are you seeing on the ground in terms of storage demand? How big an opportunity could that be for on-site storage development on your end, and potentially at data centers?

Andrés Gluski (President and CEO)

Energy storage is really critical to meet the growing demand that we're seeing. It is like a hammer. It has many, many uses. Definitely, there is a behind-the-meter use in the data centers themselves to smooth out their demand and also to have very fast reaction should there be any interruption if they're being fed by the grid. That is number one. Number two is, quite frankly, using renewables to provide a, you know, dispatchable energy for a longer period of time, and transmission as well. Already, more than half of our solar projects are coming with batteries. I would expect more demand for standalone batteries, you know, for grid services, into the future. Batteries, demand for batteries will be very strong.

You know, even gas plants, if you have a peaking gas plant, you can dispatch it more efficiently if you put batteries on it. One of the first applications we actually had with battery was on a fossil plant, in Chile. So again, many, many uses. We see strong demand, and we do see demand for, you know, behind the meter as well at the data center itself.

David Arcaro (Executive Director of Equity Research)

Okay, great. No, thank you so much. Appreciate it.

Andrés Gluski (President and CEO)

Yeah, thanks.

Operator (participant)

Thank you. Our next question comes from Julien Dumoulin-Smith from Jefferies. Your line is now open. Please go ahead.

Julien Dumoulin-Smith (Managing Director of Equity Research)

Hey, good morning, team. Thank you guys for the time, as always. Look, I wanted to focus first on the utility opportunity. I raised this in as much as obviously you had the IRP update here to IPALCO the other day. Can you give us a little bit of a sense of how far that things are advanced there? I mean, we obviously take note of what happened with NiSource here recently. Separately, we saw the revisions of PJM at DPL here recently. You guys cite 2 GW of potential, advanced negotiations. I think the pipeline's up to 6 GW. How would you set expectations, both in terms of near-term opportunities, and how does that compare against the guidance that you guys gave previously into the 11% rate-based growth? How would you help frame and sensitize that out?

Ricardo Falú (EVP and COO)

Thank you, Julien. Good morning. This is Ricardo. I would say in terms of AES Indiana, we are in advance negotiations. I think the IRP that we filed last week represents sort of the potential scenarios and the opportunity that we are currently pursuing. We expect to be in a position to announce, you know, the deals in the next couple of months. You know, I think in the IRP, you see that we run scenarios ranging from, you know, 520 MW-2.5 GW. I think we believe, you know, these deals will be more in the 1.5 GW-2.5 GW range. Again, that's something we will be announcing soon. Of course, that will include, you know, building the transmission as well as the generation capacity needed to support that massive load.

I think in the case of Ohio, we have 2.1 GW already signed. I would say between the two utilities, we have more opportunities that we are, you know, discussing with the hyperscalers that, of course, we will communicate and share more details as the deals materialize.

Julien Dumoulin-Smith (Managing Director of Equity Research)

Got it. Excellent. If you can elaborate a little bit on the powered land opportunity, I mean, you made some tantalizing comments here in the remarks. What exactly does this specific partnership with the data center look like? Is this co-located with a gas plant versus renewables? What exact permutation are you thinking about here? How do you think about extracting value? Is this about using existing assets or are they allowed to co-locate and have to build or bring new generation as well as part of this arrangement? I mean, just love to hear the parameters as best you see this coming together as an example, and how much further you see, if you see for this, the extent to which it is a co-located thermal opportunity.

Ricardo Falú (EVP and COO)

Okay. No, this is a co-located opportunity, and it's interconnected, you know, really with the grid, but also with renewables. So it's a co-located opportunity. We, you know, helped develop the site, and we're monetizing this. You know, we will provide more color as this project progresses, and we can announce it jointly with our client.

Julien Dumoulin-Smith (Managing Director of Equity Research)

Okay. All right. Fair, fair. Sounds like we gotta stay tuned. On Uplight, anything to say there? I just noticed that in the queue here.

Ricardo Falú (EVP and COO)

Uplight, you know, it was our JV with Schneider Electric. It added more capacity to it. Things like AutoGrid were taken in, so it has a bigger offering. You know, though that market was a bit tough, in the sense that with the uncertainty that they were in, in the markets, the sales of new services were lower. We are seeing that market pick up now. Yes, there definitely was a slowdown in the ability to absorb new lines of business in that JV.

Julien Dumoulin-Smith (Managing Director of Equity Research)

Yeah. No, I was struck by the virtual power plant business being down. All right. Excellent. Thank you guys. Appreciate it. Take care. Talk to you soon.

Ricardo Falú (EVP and COO)

Yeah. Thank you, Julien.

Julien Dumoulin-Smith (Managing Director of Equity Research)

Thank you.

Operator (participant)

Thank you. Our next question comes from Dimple Gosai from Bank of America. Your line is now open. Please go ahead.

Dimple Gosai (Sustainability Equity Research Analyst)

Good morning. Thanks for taking my question. You, your slides kind of reaffirm strong data center PPA traction with, you know, 1.6 GW kind of signed year to date. Can you quantify how contracted ROIC or unlevered returns on recent data center PPAs compared to your legacy book and how pricing has moved in the last 6-12 months? I have a follow-up, please.

Andrés Gluski (President and CEO)

Oh, Steve.

Stephen Coughlin (EVP and CFO)

On the data center deals?

Andrés Gluski (President and CEO)

Yeah.

Stephen Coughlin (EVP and CFO)

You know, so, you know, these are, we made good progress. We have signed a total 2.2 GW to date of PPAs. We feel very comfortable hitting the minimum of 4 GW that we set out to achieve to get to the 14 GW-17 GW total. The 1.6 is the portion of that that is with data centers. Notably, I think you saw a slide where we have, you know, we are already doing, we already have in operation 4.2 GW, another total of 4 GW in construction or backlog, with data centers, including the 1.6 for a total of 8.2. That also does not include our utility business with data centers. So that is just around, just around powering data centers directly through PPAs. The returns on these tend to be at the higher end of our 12%-15%.

They are, you know, these are projects that are in high demand. The time to power is extremely important. And because we have been developing a pipeline for many years now, you know, we have projects that are ready. We're not just coming to this, you know, return to put projects together at the last minute. We've been developing a 50 GW pipeline for many years. So we have projects that can meet the pipeline time to power needs that are in the locations where our partnerships with data center hyperscalers have identified where they need power. And we prioritize our development efforts in that regard. Again, given the high demand, the need for near-term projects, and our ability to structure the solutions creatively that these folks need, you know, we're seeing returns in the upper part of our 12%-15% returns.

Andrés Gluski (President and CEO)

Yeah. I would also add that a key factor here is the supply chain. As we've said in the past, you know, we basically had on-site or in-country everything that we needed for this year and next. This has been very favorable since we haven't been affected by any tariffs. You know, starting in 2026, we will be relying on domestically produced key inputs. I think an important element in terms of looking at the returns of these projects is how we have such a secure supply chain in place.

We also have very favorable arrangements with our contractors for construction, with, you know, we basically give them a series of constructions and they roll from one to the other. All of these efficiencies are being reflected in the returns.

Dimple Gosai (Sustainability Equity Research Analyst)

Okay. The natural follow-up is that, you know, with hyperscalers increasingly exploring, you know, on-site and hybrid procurement strategies, and the shift towards behind-the-meter or co-located structures, how does that actually change your development, return, or risk mix? How do we kind of think of that going forward?

Andrés Gluski (President and CEO)

Look, we see so much demand for the products that we are selling that we do not think that is going to affect us. Really, when you talk to the hyperscalers, you know, first it is time to power. Any new announcements are years in the future. In addition, you do need to be connected to the grid. I think as Steve said, it is having the opportunities created in the right locations in the right markets that they are really looking for. Look, the demand is so large, I do not see sort of cannibalization and sort of behind-the-meter from the hyperscalers.

Operator (participant)

Thank you. Our next question comes from Steve Fleishman from Wolfe Research. Your line is now open. Please go ahead.

Steven Fleishman (Senior Equity Research Analyst)

Hey, good morning. How you guys doing?

Stephen Coughlin (EVP and CFO)

Very good. Morning.

Steven Fleishman (Senior Equity Research Analyst)

Good morning. Okay. Good. Just, maybe a high-level question. Just as you're getting into this next period of the, of the plan, soon, maybe, you know, back a few years ago when you did the analyst day, you shifted to the EBITDA framework, along with the earnings. And part of the earnings was just that they were lumpy. And, and, you know, you, you know, they hit one year. How are you thinking about that as you get into this next period? Are you gonna really focus more on the EBITDA guide or still try and target it like an earnings growth?

Stephen Coughlin (EVP and CFO)

Hey, Steve. Look, we continue to see EBITDA being the best way to measure the AES portfolio, today and going forward. You know, the part of moving to it was to give a, you know, the underlying recurring earnings from our contracted businesses, related to the PPAs, more related to the ongoing cash flow versus the EPS that is obviously very highly influenced by the lumpiness of tax credits and when projects get brought online. You know, given that now with the new law in the OBBA and the new guidance, we still see an extended track for tax credits. We believe they'll continue to be a significant influencer of the EPS and causing that lumpiness. We think EBITDA continues to be the best way to look at the portfolio.

Also, the EBITDA, you know, is reaching that inflection, as Andrés and I discussed in our prepared remarks. You know, what's driving it forward now is both, you know, the fact that we've really scaled up the operating portfolio. So we've installed just over the past two years, 2024 and 2025, 6.9 GW of new capacity. And we've grown the utility rate base by $1.3 billion in the past year in investment. So we're seeing, you know, roughly, going into 2026, from new projects, about $250 million of new EBITDA, from utilities, about $100 million of new EBITDA, from cost savings, going from the $150 million this year to the full annualized $300 million. And so we really see just a significant inflection here. Again, without the.

Stepping down in the energy infrastructure that we've seen, to the same degree, those positives that I just mentioned are largely going to flow all the way through to the total AES. Of course, there'll be some things that fall off. For example, the Maritza PPA does expire next year, and have a partial offset, but not nearly to the same degree that things have been offsetting as we had been improving the quality of the portfolio, you know, exiting markets where we were not seeing an attractive future for AES. It's been a quality story, but now it's both quality and a significant increase in the growth rate at the same time.

Steven Fleishman (Senior Equity Research Analyst)

Great. Okay. Just a couple other tie-up questions. When we think about this DTA type transaction, is there something related to this that would be an ongoing PPA, or is this more of a build-on transfer type thing, or kind of a mix of both?

Andrés Gluski (President and CEO)

It's a mix of both. It does have an ongoing PPA.

Steven Fleishman (Senior Equity Research Analyst)

Okay. Good. And then lastly, just on Indiana, you know, your point's very valid on the, on the rate levels and kind of maybe just a little bit of bad timing in the rate case and can't control just the politics. So just how important is it gonna be to get, do you think, the, the consumer groups or at least one of them on board? In this settlement, do you think, or how, how should we just think about that aspect?

Ricardo Falú (EVP and COO)

Yeah. Good morning, Steve. Thank you. This is Ricardo. So I think, you know, the partial settlement that we reach, I think, strikes for the right balance between affordability and also the investments that are needed to have a reliable and resilient grid. As part of the agreement, AES Indiana agreed to reduce the original revenue increase by $105 million, which is 53%. If you look at, you know, and also we are committing not to have another rate base increase until 2030. All in all, it is a 2% annual increase through 2029, which is significantly lower than the cumulative inflation since 2022, which was the last rate, you know, increase. We are confident on this settlement going through the different steps in the regulatory process.

More importantly, as I mentioned, you know, it strikes the right balance between affordability and the investments that are needed to have a reliable, reliable grid. Of course, we will always welcome the Office of Utility Consumer Counselor to join the settlement. They could do it at any time of this process. In any case, we expect a positive outcome, as the commission, you know, is, we need to roll for something that makes sense from an affordability as well as reliability perspectives.

Steven Fleishman (Senior Equity Research Analyst)

Okay. No, that makes sense. Thank you very much.

Stephen Coughlin (EVP and CFO)

Thank you, Steve.

Operator (participant)

Thank you. Our next question is from Anthony Crowdell from Mizuho. Your line is now open. Please go ahead.

Anthony Crowdell (Managing Director of Equity Research)

Hey, good morning. If I could follow up on Steve's first question, when I think on the fourth quarter, when you give us a roll forward, any thought to going out five years or does the company still plan to keep the outlook limited to three years?

Stephen Coughlin (EVP and CFO)

Hey, Anthony, it's Steve. I would expect to go to three years. Again, I think that is, you know, sufficiently long-term, counting, you know, for things that will change naturally around the world around us. I think we'll go out to 2028 is what I would want you to expect.

Anthony Crowdell (Managing Director of Equity Research)

Lastly, if I follow up on Julien's question, and I apologize, I didn't follow the difference on the power-powered land solution. I'm just wondering, what's the difference between that program and also just maybe a PPA with a customer? If it's easier offline, I could follow up with EEI.

Andrés Gluski (President and CEO)

We can give you more, you know, color, let's say, offline. You know, basically one is a power land where you develop the data center and it has an associated PPA with it. There, it's a different product that you're selling. One is, you know, energy over X number of years, and the other one is actually providing the site on which you can build the data center.

Anthony Crowdell (Managing Director of Equity Research)

Got it. So it'd be AES would actually own the land, build the data center, and there's a PPA attached and a whatever, a hyperscaler or someone coming there and a one-stop shop all from AES.

Andrés Gluski (President and CEO)

That's a way of thinking of it.

Anthony Crowdell (Managing Director of Equity Research)

Great. Thank you. That's all I had. Thanks so much.

Andrés Gluski (President and CEO)

Thank you.

Operator (participant)

Thank you. We have a follow-up question from Dimple Gosai from Bank of America. Your line is now open. Please go ahead.

Dimple Gosai (Sustainability Equity Research Analyst)

Thank you. More of a housekeeping question, to be fair. I think you mentioned around 50% growth for the year in the renewable segment is the expectation here, but it looks like you need closer to 57% for the low end for the renewables EBITDA guidance based on the 4Q 2024 comp. So maybe can you comment on the key levers and considerations there that we need to consider to hit 2025 EBITDA guidance? Thank you.

Stephen Coughlin (EVP and CFO)

Hey, Dimple, it's Steve. You're right that it actually is higher when you look at the prior year unadjusted for the Chile renewables, which moved into the segment this year. The 50% includes, when we adjust into 2024, on a pro forma basis, the Chile renewables that we were able to segregate from the thermal segment last year. That's the 50% that I'm referring to. It is even higher growth rate when you do not take that Chile into account at all for 2024.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star followed by one on your telephone keypad now. We currently have no further questions. Apologies. We have a question from Aiden Kelly from JPMorgan. Your line is now open. Please go ahead.

Aidan Kelly (Equity Research Analyst)

Hey guys. Good morning.

Stephen Coughlin (EVP and CFO)

Now I can't hear you.

Operator (participant)

Apologies.

Aidan Kelly (Equity Research Analyst)

You can't hear me? [audio distortion]

Operator (participant)

We have lost. Apologies, we have lost connection with Aiden Kelly. As a reminder to ask a question, please press star followed by one on your telephone keypad. We currently have no further questions, so I'll hand back to Susan Harcourt for closing remarks.

Susan Harcourt (VP of Investor Relations)

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.

Operator (participant)

This now concludes today's call. Thank you for joining. You may now disconnect your line.