AES Q2 2025: 80% of 1.3GW to commission in Q3, strong PPA demand
- Accelerated project commissioning: The company conveyed that around 80% of the remaining 1.3 gigawatts is already complete with most projects expected to come online in Q3, supporting a quicker path to revenue and EBITDA recognition.
- Strong demand and historic undervaluation: Executives noted that the business has been consistently undervalued relative to its robust backlog and strong PPA demand from data center customers, suggesting potential for a significant upside.
- Technological and generation flexibility: AES’s use of its Maximo AI-driven solar installation technology—which significantly speeds up construction—and its ability to flexibly deploy both renewables and gas generation positions the company to efficiently meet varied customer needs and bolster margins.
- Regulatory and Tax Policy Uncertainty: Concerns remain over potential changes such as executive orders and FiOQ-related guidelines that may affect AES’s safe harbor protections for tax credits, exposing the company to retroactive policy shifts and additional capital requirements.
- Dependence on Tax Incentives: AES’s project economics currently rely heavily on tax credit monetization. Any unexpected phase-out or reduction in these incentives could erode project margins and force the company to secure additional capital to maintain competitive returns.
- Execution Risk on Remaining Projects: Although AES is confident that the remaining 1.3 gigawatts of projects will be commissioned primarily in Q3 and partly in Q4, any delay in this schedule could adversely affect short-term EBITDA and EPS recognition, introducing uncertainty into their near-term financial performance.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EBITDA | FY 2025 | $2.65 billion to $2.85 billion | $2,650,000,000 to $2,850,000,000 | no change |
Adjusted EPS | FY 2025 | $2.10 to $2.26 | $2.10 to $2.26 | no change |
Renewables SBU Adjusted EBITDA | FY 2025 | $890 million to $960 million | $890,000,000 to $960,000,000 | no change |
Parent Free Cash Flow | FY 2025 | no prior guidance | $1,150,000,000 to $1,250,000,000 | no prior guidance |
Adjusted EBITDA Growth Rate | Long-Term | no prior guidance | 5% to 7% annually | no prior guidance |
Renewables Growth Rate | Long-Term | no prior guidance | 19% to 21% annually | no prior guidance |
Utilities Growth Rate | Long-Term | no prior guidance | 13% to 15% annually | no prior guidance |
Adjusted EPS Growth Rate | Long-Term | no prior guidance | 7% to 9% annually | no prior guidance |
Parent Free Cash Flow Growth Rate | Long-Term | no prior guidance | Reaffirmed long-term growth rates | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Accelerated Project Commissioning & Execution Risk | Q1: Emphasized completing projects and mitigating execution risk with safe harbor measures. Q4: Focused on a large-scale pipeline with cost reductions and low execution risk. | Q2: Highlighted 80% completion of remaining projects, reliance on AI robotic solar installation technology, and proactive risk mitigation measures. | Consistent confidence with enhanced operational efficiency through innovative technology and robust risk management. |
Demand from Tech and Data Center Customers | Q1: Stressed strong demand by signing 9.5 GW of PPAs and tailoring projects to meet data center “time to power” requirements. Q4: Emphasized strong corporate and tech demand—including needs driven by the AI revolution—and notable new PPAs. | Q2: Secured 1.6 GW of new PPAs exclusively with data center customers and reiterated the sector’s robust, scalable demand. | Sustained strong demand with stable market leadership and a positive outlook on the tech/customer segment. |
Regulatory & Tax Policy Uncertainty and Dependence on Tax Incentives | Q1: Focused on safe harbor protections, international diversification, and minimizing impacts from U.S. policy shifts. Q4: Highlighted onshoring of the supply chain and safe harbor measures to shield the business from regulatory changes. | Q2: Emphasized resilience to policy changes through a domestic supply chain strategy, safe harbor measures, and confidence in generating strong returns despite evolving tax incentives. | Consistent resilience with reinforced measures to mitigate policy and tax uncertainties. |
Accretive Financial Moves and Balance Sheet Strengthening | Q1: Detailed asset sales, cost savings, and deleveraging initiatives that boosted credit metrics. Q4: Focused on improving credit metrics through cost savings, refinancing, and a leaner development program. | Q2: Reported improved free cash flow to debt metrics, a self-funded growth plan, and additional cost savings actions to strengthen the balance sheet. | Ongoing financial strengthening with a consistent focus on self-funding growth and optimizing capital allocation. |
Supply Chain Management and Tariff Exposure Mitigation | Q1: Emphasized building a robust U.S.-made supply chain with minimal tariff exposure through strategic partnerships and domestic sourcing. Q4: Highlighted onshoring and safe harbor protections to limit tariff risks and regulatory uncertainties. | Q2: Reiterated the strategy of sourcing major equipment from U.S.-based suppliers and maintaining a diversified, tariff-protected supply chain. | Maintained strong supply chain resilience with continuous emphasis on mitigating tariff exposure. |
AI-Driven Technological Innovation and Generation Flexibility | Q1: Not mentioned [N/A]. Q4: Briefly referenced the AI revolution impacting energy needs. | Q2: Introduced the use of AI robotic solar installation technology (Maximo) and expanded discussion on generation flexibility across energy sources. | Emerging focus as the company leverages AI technology and flexible generation strategies for competitive advantage. |
Lumpy PPA Signings and Revenue Volatility | Q1: Addressed lumpy PPA signings and highlighted the business model designed to mitigate revenue volatility through long-term contracts. Q4: No specific discussion on these topics [N/A]. | Q2: No mention of lumpy PPA signings or revenue volatility [N/A]. | Topic phased out in current discussions, suggesting reduced emphasis as long-term contracting ensures revenue stability. |
Renewable Pipeline Growth and Investment Strategy | Q1: Detailed pipeline expansion with completed projects, significant new PPAs, and international opportunities. Q4: Focused on a robust pipeline with a shift toward fewer, larger, higher-return projects and reduced outlays for long-term horizons. | Q2: Outlined plans to add 3.2 GW of new capacity, emphasizing a safe harbored backlog and domestic supply, while maintaining strong investment in growth. | Consistent growth with a refined strategy prioritizing quality and resilience in the project pipeline. |
Delayed Exit from Coal and Associated Transition Risks | Q1: Mentioned prior-year impacts from accelerated coal asset monetization affecting EBITDA. Q4: Discussed delaying the exit from coal plants to support cash flow and improve financial metrics, while planning for a full exit later. | Q2: No specific discussion on a delayed exit or associated transition risks. | Absence in the current period suggests a deprioritization of coal transition concerns as focus shifts to renewable and tech-driven growth. |
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Project Timing
Q: When will remaining projects come online?
A: Management expects nearly 80% of the remaining 1.3 GW to be commissioned in Q3 with a small portion finishing in Q4. They also plan to update longer‑term guidance, confident in their safe harbor protections, ensuring steady EBITDA and EPS recognition. -
Data Center Demand
Q: Are data center PPAs accelerating post-OBB?
A: Management reported extremely strong demand with robust reservations and bookings from data center customers as they rush to lock in PPAs before tax credits phase out, highlighting compelling renewables economics. -
Safe Harbor Risk
Q: Is current policy risk affecting safe harbor?
A: They are confident that nearly all projects are protected by existing treasury guidance and domestic supply chains, ensuring that modifications from new executive orders won’t impact their safe harbor status. -
Acquisition Value
Q: How is the company’s valuation compared to past?
A: Management believes the business has been consistently undervalued, citing a strong, diversified portfolio and execution track record, though they refrain from commenting on any specific acquisition details. -
Board & Asset Sales
Q: Has the board acted on acquisition or asset sales?
A: The team declined to comment on current rumors or potential asset sales—including those involving Uplight—emphasizing that any move would occur only if the right price materializes. -
PPA & Technology Mix
Q: What are the details on signed PPAs?
A: They noted signing $650 MM in PPAs with Meta and an additional 1.6 GW with data center customers, with projects largely focused on solar paired with batteries. They remain open to gas solutions if customer demand warrants. -
Ohio Utilities Lag
Q: What’s the current rate lag in Ohio utilities?
A: Management is optimistic; existing rate cases are settling soon with a new three‑year forward rate structure expected by 2027, which should largely eliminate regulatory lag and support continued load growth. -
Gas Build-Out
Q: Is gas generation being built for data centers?
A: They are actively converting a 1.1 GW coal plant to gas in Indiana, have completed a 670 MW combined cycle plant in Panama, and maintain robust gas capabilities to meet customer demand without counting these projects in current pipeline targets. -
Maximo Cash Flow
Q: How does Maximo contribute to cash flow?
A: Currently, Maximo is in beta testing, operating internally to boost efficiency; management has no near‑term cash flow projections for it, with future commercialization likely only after further maturation beyond 2027.
Research analysts covering AES.