The AES Corporation

Good morning and a warm welcome to the AES Corporation fourth quarter and four year 2022 financial results call. My name is Candice and I will be your moderator for today's call. All lines have been placed on mute during a presentation portion of the call with an opportunity for question and answer at the end. If you'd like to ask a question, please press start followed by one on your telephone keypad. I would now like to hand you over to our host, Susan Harcourt. Vice President of Investor Relations. The floor is yours. Please go ahead.

Thank you, Operator. Good morning and welcome to our fourth quarter and full year 2022 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 discussed in our most recent 10-K and 10-Q filed with the SEC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andres Skluski, our President and Chief Executive Officer, Steve Coughlin, our Chief Financial Officer, and other senior members of our management team. With that, I will turn the call over to Andres.

Good morning, everyone, and thank you for joining our fourth quarter and full year 2022 financial review call. Today, I will discuss our 2022 financial results and strategic accomplishments, as well as our 2023 guidance. Steve Coughlin, our CFO, will discuss our financial results and outlook in more detail shortly. Beginning with our 2022 results and accomplishments on slide three, I am very pleased with our performance in 2022, which was our best year ever. Adjusted EPAs came in at $1.67, above our guidance range of $1.55 to $1.65. This accomplishment is primarily the result of three factors, strong performance across our portfolio, growth in renewables, particularly from solar and energy storage in the U.S., and the benefit of embedded optionality in our LNG contracts. Turning to slide four, I would like to highlight an area in which we are particularly proud of our performance, our success in bringing our construction projects online. In 2022, despite numerous market-wide challenges throughout the year, we added approximately two gigawatts of new projects to our portfolio, which was consistent with our expectations at the beginning of the year. Our success was the result of the extensive work we have done to develop the people, processes, and solid supplier relationships to rapidly expand our portfolio of renewables. We see our ability to execute as the source of competitive advantage that is highly valued in the marketplace. Not only does it support our strong global customer relationships, but it also contributes to our confidence in our long-term forecast. In addition to our execution, 2022 was a year where we focused on taking actions that will position us well for future growth. These actions included signing a record number of new PPAs for projects that we will complete in the coming years, investing in our pipeline of future projects, creating a leading position in green hydrogen, establishing strong regulatory foundations, to support future utility growth and achieving significant coal phase-out milestones in Hawaii and Chile. As you can see on slide five, 2022 was a record year for PPA signings for AES. We signed 5.2 gigawatts of renewables under long-term contracts, increasing our backlog to 12.2 gigawatts. In fact, for the second year in a row, BNEF reported that AES signed more renewable deals with corporate customers than anyone else in the world. This included an expansion of our 24-7 structured projects. Moving to slide six, we also worked hard throughout the year to grow our pipeline of future projects, which increased by 25% to 64 gigawatts, including 51 gigawatts in the U.S. We see extensive and growing demand for renewables worldwide and expect that in the future, a key limitation to growth will be the availability of projects. We have been preparing by investing in land interconnection and permitting work to advance the projects that will be used for future PPA signings. Turning to slide seven, we also established ourselves as a leader in green hydrogen. In December, we announced a partnership with Air Products to develop, build, and own and operate the largest green hydrogen production facility in the U.S. This project will have the capacity to produce more than 200 metric tons per day of green hydrogen and will include approximately 1.4 gigawatts of wind and solar generation. It builds upon the expertise we have developed in combining renewables, to create around-the-clock carbon-free energy. This project has the potential to serve approximately 4,000 trucks, which, while significant, represents less than 0.1% of the current market for long-haul trucking. As such, we see a massive total addressable market for decarbonizing the transportation sector. Turning to slide eight, another focus of our 2022 work was to develop strong regulatory foundations for future growth at our U.S. utilities, where we expect to grow the combined rate basis 9% annually through 2025. Specifically, at AES Ohio, we filed a new Electric Security Plan, or ESP4, to enhance and upgrade the network and improve service reliability. With the lowest T&D rates in the states across all customer categories, AS Ohio is well positioned to make the much needed customer centric investments. A ruling by the Ohio Commission on ESP4 is expected this summer. Finally, we're pleased with the constructive outcome of AS Ohio's distribution rate case in which the Ohio Commission approved an annual revenue increase of $75.6 million. At AS Indiana, we filed our Integrated Resource Plan, or IRP, with the Indiana Utility Regulatory Commission in December. AS Indiana's near-term plan includes the conversion of the utility's last two coal units to natural gas in 2025 using an existing onsite gas pipeline. It also includes the addition of up to 1.3 gigawatts of new wind, solar, and energy storage by 2027 and should reduce AES Indiana's carbon intensity by two thirds from 2018 to 2030. This plan is an important step to fully transition away from coal and provides the opportunity for substantial additional investments at AES Indiana. Now turning to our outlook for 2023 on slide nine. Today we're initiating adjusted EPS guidance of $1.65 to $1.75. and reaffirming our long-term growth rate of 7% to 9% through 2025 for both adjusted EPS and parent-free cash flow off a base year of 2020. Our focus this year will remain on execution. As you can see on slide 10, we expect to complete approximately 3.4 gigawatts of new projects, including 2.1 gigawatts in the US. I will note that our 2023 guidance range does not include a potential upside from 600 megawatts of projects currently scheduled to be completed in December 2023, but which are likely to come online in 2024. Looking at our growth through 2025 on slide 11, we expect to maintain the pace of PPA signings we have established with an estimated 14 to 17 gigawatts expected to be signed over the next three years. we see strong demand for renewables across all of our key markets, particularly the US, where the benefits of the Inflation Reduction Act or IRA are becoming even clearer. Thus, given the strength of our backlog and our visibility into future PPA signings and project completions, we are confident in reaffirming our long-term guidance through 2025. Finally, today we're announcing that we will hold an investor day this spring We will be sharing our strategic long-term view of the company, introducing new business segments, and extending our long-term growth rate. We will provide additional details at a later date. With that, I now would like to turn the call over to our CFO, Steve Kauflin.