AES Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : Hey, good morning team. Thank you guys very much. Appreciate the time and the opportunity here. Nicely done on this insurance transaction. Actually, if I can just start off a little bit of housekeeping there. How do you think about that transaction just in terms of the prospective EBITDA impact, just when you think about the financials here? I mean again, innovative idea in how to raise kind of equity indirectly, right, from private capital as you say.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : Awesome. Yeah. Nicely done, Steve, I got to say. Neat idea. If I can turn more substantively, right, just to clarify your earlier comments. First, just on the tariff exposure, is it principally that you've got a recovery from your suppliers, i.e., they are taking the risk when you guys provide this 0.3% that effectively the risk burden is effectively put on the vast majority of your suppliers versus going back to your customers? I just wanted to clarify that. And then related, just given the [400 and change] megawatts of origination this quarter, given the backdrop today, would you say that this is kind of what we should be expecting for this year? Or could you see some sort of more meaningful uptick? I'm just trying to get a sense of what that cadence should be against setting expectations for further down the line.

Question: Julien Dumoulin-Smith - Jefferies - Analyst : Alright, excellent guys, thank you. I'll leave it there.

Question: Nicholas Campanella - Barclays - Analyst : Hey, good morning everyone, thanks for taking my questions and appreciate all the color. I just wanted to come back to the insurance sale quickly. So I know you kind of disclosed the Class B dividends are like $145 million to $198 million. Is that like a yearly number or is that a cumulative number? And I guess if you hit that call option in 2030 to 2035, what is that strike price? And how should we kind of think of the cost of financing here that you just raised versus, I guess, deploying future CapEx at 13% to 15% returns? Maybe you could just unpack that.

Question: Nicholas Campanella - Barclays - Analyst : Okay, that's helpful. Appreciate that. And I'll try not to butcher it but just the Cochrane buyout that you disclosed in the 10-Q. Can you just give us a sense of what you're purchasing and how much you paid for it, either on like a multiple basis or cash and just the rationale behind that transaction? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, AES.N - Q1 2025 AES Corp Earnings Call

Question: Nicholas Campanella - Barclays - Analyst : Okay, thank you.

Question: David Arcaro - Morgan Stanley - Analyst : Hey, thanks so much, good morning. I was wondering on the AGIC sale, just one other follow-up there. You sold a minority stake. I'm just wondering, is there any strategic reason that you want to retain control in the remaining stake there? Or could that be a consideration for future asset sales out in the rest of the program, the financing plans going forward as (multiple speakers) further sell-down says?

Question: David Arcaro - Morgan Stanley - Analyst : Okay, great. And I was wondering if you could comment on just what you're seeing in terms of latest renewable demand trends. Has there been any pull forward ahead of potential IRA changes here or any just general change in customer demand levels that you're seeing?

Question: David Arcaro - Morgan Stanley - Analyst : Okay sounds good thank you.

Question: Durgesh Chopra - EVERCORE ISI - Analyst : Thank you, good morning team. Thanks for giving me time, Steve, congrats on this transaction. Maybe just a little bit more detail. You talked about the cash distributions being conservative. Can you just frame for us the $40 million or so average distributions a year? What is that as a percentage of total cash generated for that business?

Question: Durgesh Chopra - EVERCORE ISI - Analyst : Got it. Accretive transaction there. Just digging on the financing topic, there's been a lot of discussion around transferability. Some legislation recently proposed or is probably doesn't get much traction. But just in terms of thinking about risks, can you talk about like in an event the transferability is eliminated, do you go back to tax equity and perhaps even frame for us what percentage of your plan is being provided by cash financing, is being provided by transferability? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, AES.N - Q1 2025 AES Corp Earnings Call

Question: Durgesh Chopra - EVERCORE ISI - Analyst : Appreciate that discussion. Just real quick, sorry, this is my third question, I understand and realize. Just the hydrogen project that was canceled in Texas, are we still pursuing other customers for contracted the power generation that I believe it was over one gig?

Question: Durgesh Chopra - EVERCORE ISI - Analyst : Thank you Andreas.

Question: Michael Sullivan - Wolfe Research - Analyst : Hey, good morning. Wanted to just ask on where we stand on the longer-term asset sale target. Are you still shooting for that $3.5 billion? Where are we against that? And what else are you looking at for potential sales?

Question: Michael Sullivan - Wolfe Research - Analyst : Okay, great. That's helpful. And back to the IRA discussion here. Do you all have any view on kind of when this starts to take shape in the Reconciliation Bill? Feels like things starting to come to a head a little bit. And then also just specifically on transferability, your view on whether a safe harbor would cover you on that even in a scenario where that were to go away.

Question: Michael Sullivan - Wolfe Research - Analyst : Appreciate that caller. Thank you.

Question: Richard Sunderland - JPMorgan - Analyst : Hey, good morning. I just wanted to follow up on transferability one more time. On an agency metric basis, what would be the impact to your FFO without transferability and how do you expect the agencies to treat that?

Question: Richard Sunderland - JPMorgan - Analyst : Got it. That was very clear. So presumably on a Moody's basis, this would push out the improvement you've called out for '26 but you also expect Moody's to look through the impacts, given what you laid out earlier on the value through tax equities being the same?

Question: Richard Sunderland - JPMorgan - Analyst : Understood. And then maybe I'll just follow up with one more. I mean, I think there's been a lot of attention on transferability and maybe some fears out there that this first draft on the IRA could have a lot of negative headlines, then we migrate some more reasonable middle ground. Do you think transferability is something that may come out in that initial draft and then goes back in? Any thoughts on sort of the magnitude of that headline risk initially versus where things might ultimately shake out in your earlier commentary?

Question: Richard Sunderland - JPMorgan - Analyst : Thank you.

Question: Anthony Crowdell - Mizuho - Analyst : Hey, good morning. Thanks for squeezing me in. Most of my questions, Richard's taken care of in front of me. Just quickly on Ohio, some legislation passed earlier, I think, this week, multiyear rate plans but also maybe removal of OVEC revenues. Just curious the impact for AES Ohio, and does it change your plan on rate filings? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 2:00PM, AES.N - Q1 2025 AES Corp Earnings Call

Question: Anthony Crowdell - Mizuho - Analyst : Oh great, thanks for taking my questions.