The AES Corporation

Good morning, and thank you for joining the AES Corporation Third Quarter 2023 Financial Review Call. My name is Kate, and I will be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to turn the call over to your host, Susan Harcourt, Vice President of Investor Relations. You may proceed.

Thank you, Operator. Good morning and welcome to our third quarter 2023 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 Gluski, 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 third quarter 2023 financial review call. In addition to discussing our third quarter and outlook for the remainder of the year, I will address some concerns that we have heard from investors since our second quarter call in August. Specifically, my remarks today will focus on three areas, strategic and financial updates, our funding sources, and our exposure to interest rates. Beginning on slide three, I am pleased to report that our financial results continue to be strong, and we now expect full-year adjusted EPS to be in the top half of our guidance range of $1.65 to $1.75. We are also reaffirming all of our short and long-term financial metrics. For the third quarter, adjusted EBITDA with tax attributes was $1 billion. and adjusted earnings per share was 60 cents. I'm very pleased with these results, which Steve will address in more detail shortly. Turning to slide four, we continue to see strong demand for long-term contracts for renewable, particularly from our primary customer base of large technology companies with a rapidly expanding data center business. Notably, even with rising interest rates, renewables continue to have the lowest levelized cost of energy, or LCOE, across almost all of the markets where we operate. So far this year, we have signed 3.7 gigawatts of new PPAs, including 1.5 gigawatts since our second quarter call in August. This number does not include the 1.2 gigawatts of new projects we were recently awarded in New York. Given that we have several large contracts that could be finalized in the coming weeks, we remain confident in our ability to sign at least 5 gigawatts of new long-term PPAs this year. Included in the new contracts that we have already signed is our first ever Developed Transfer Agreement, or DTA, to transfer to a utility 975 megawatts of solar plus storage at the point of commencement of construction. This structure allows us to create value from our advanced pipeline without the investment of any AES equity beyond the development costs. Now turning to our backlog on slide five. Our backlog of projects with signed long-term contracts is now 13.1 gigawatts. Of this total backlog, we expect more than 70% or over nine gigawatts to come online through 2025, and we have already secured all of the necessary equipment for these projects. Furthermore, 44%, or 5.8 gigawatts, is already under construction. Moving to slide six, our construction program continues to make excellent progress, with 93% of the megawatts expected to come online this year already having achieved mechanical completion. As a result, we have increased our year end construction target from 3.4 gigawatts to 3.5 gigawatts to incorporate the progress we have made this year. This figure reflects a more than doubling of the renewable projects placed in service compared to last year. Now turning to slide seven. In light of current market conditions, I would like to directly address the sources of funding that we have in our long-term plan. We will not be issuing any equity until at least 2026. And even then, we will only issue equity if it is value accretive to our shareholders. Instead, we are significantly accelerating our asset sales and believe we now have line of sight to at least $2 billion of asset sale proceeds in 24 and 25 and expect our asset sale proceeds to total at least $3.5 billion through 2027. With the proceeds from the sell downs of our businesses in the Dominican Republic and Panama that we announced in September, we have already secured all of our external financing needs for the year at attractive terms. The general buckets that are part of our asset sales plan are coal exits, sell-downs of U.S. renewable projects, partial monetization of businesses, including new energy technologies, and the exit of certain non-core businesses. We also plan to bring in partners at some of our businesses, as we have done in the past, to reduce future equity needs. While we never disclose specific transactions until we have actually signed sales agreements We are in active and positive discussions with many interested counterparties. Turning to slide eight, the last topic I want to address before turning the call over to Steve is our exposure to interest rates. As a normal course of business, we have always proactively matched the profile of the debt to the profile of the cash flows that are supporting it, which minimizes any impact from higher interest rates. Approximately 80% of our debt is non-recourse to the AES parent, and of that, the vast majority is either utility debt included in our customer rates or project-level debt that is matched to the underlying project revenues. All of our long-term debt at corp is either fixed or hedged, and as we have stated before, we've been able to pass on higher costs and interest rates in the new PPAs we sign. Finally, I want to highlight our commitment to maintaining our investment grade credit ratings, which we see as an important component of our value proposition. To that end, in every business decision we make, we take into consideration our relevant credit metrics. We take a disciplined approach to growth and overall risk management to ensure that we consistently maintain these metrics. With that, I would like to turn the call over to our CFO, Steve Coughlin.