Good morning. Thank you for attending today's AES First Quarter 2022 Financial Review Call. My name is Amber, and I will be your moderator for today's call. I now have the pleasure of handing the conference over to our host, Susan Harcourt, Vice President of Investor Relations with AES. Susan, please go ahead.

Thank you, operator. Good morning, and welcome to our first quarter 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 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 first quarter 2022 financial review call. I am very happy to report that we have attained an investment-grade rating from Moody's. We are now rated investment-grade by all three major agencies, which is an important milestone for our company and reflects a decade's worth of work to transform our business. We're also reaffirming our 2022 guidance and annualized growth of 7% to 9% through 2025. Our business model continues to demonstrate its resilience and predictability even in the face of market volatility. Steve will cover our expectations for the remainder of the year in more detail, including the seasonality of our earnings profile. Today, I will discuss our 2022 construction program and the Department of Commerce's investigation into solar panel imports, the diverse drivers of our growth, including signed renewable energy PPAs and our U.S. utility, AES Next influence, and our strategic outlook for the sector. Beginning with our 2022 construction program on Slide 4. We are laser-focused on ensuring the timely completion of projects. As we see our ability to execute on our commitments as a key source of competitive advantage. This year, we expect to complete more than 2 gigawatts of new renewables, including over 800 megawatts of solar in the U.S. In late March, the U.S. Department of Commerce launched an investigation into solar imports from four Southeast Asian countries, which collectively supply approximately 80% of solar panels for the U.S. market. The Department of Commerce is expected to make a preliminary determination on this case by no later than August. The resulting uncertainty around tariff levels has led to a drop in imports and project delays across the industry. However, due to our supply chain strategy, all of the panels for our 830 megawatts of projects to be completed in 2022 in the U.S. are already on-site, and we do not anticipate any delays to those projects. I'd also note that one-third of our 2022 renewable projects are international, and the remaining 683 megawatts in the U.S. are wind and energy storage. Moving to the diverse drivers of future growth, beginning on Slide 5. Our strategy is to provide differentiated products that allow us to work with our customers on a bilateral basis. As a result, last year, we signed a total of 5 gigawatts of PPAs for renewable energy, including more contracts with C&I customers than anyone else in the world. For the full year 2022, we continue to expect to sign 4.5 to 5.5 gigawatts of renewables under long-term contracts with a roughly 50-50 split between the U.S. and international markets. We do expect PPA signings in the U.S. to be more weighted towards the second half of the year. So far this year, we have signed or been awarded 1.1 gigawatts, bringing our backlog to 10.3 gigawatts. Despite current headwinds for the sector, such as delays in U.S. climate legislation and the supply chain issues we just discussed, we continue to see very strong demand for low-carbon energy and especially for structured products, such as our 24/7 renewable offering. In fact, as you may have seen earlier this week, we announced two key agreements for our structured products. First, the expansion of our partnership with Microsoft into California, the third market where we will supply renewable energy to match the load at their data centers; and second, our agreement with Amazon, under which we will provide 675 megawatts of renewable energy to their operations in California, including AWS's data centers. With these agreements, we are helping both companies achieve their ambitious sustainability goals. As you can see on Slide 6, we believe our development pipeline of 59 gigawatts is the second largest among U.S. renewables developers. This robust pipeline provides us with the projects we need to deliver on our backlog and continue to build on our competitive position in the market. Now turning to our regulated U.S. utility platforms, beginning on Slide 7. These businesses represent one of the key contributors to our overall 7% to 9% annual growth in earnings and cash flow, as well as advancing our objective of increasing the proportion of earnings from the U.S. to 50%. In both markets, we have the lowest residential rates in the entire state, which provides a runway for growth and investment while keeping affordable rates for our customers. Moving to Slide 8. In Indiana, we're benefiting from incentives to modernize the transmission and distribution network and transitioning to greener generation. Through 2025, we will be investing $2.7 billion, which we will recover through already approved rate mechanisms. Additionally, we expect to finalize our next integrated resource plan by this fall, allowing us to further transform AES Indiana's generation fuel mix. In Ohio, we're capitalizing on formula rate-based investments in the transmission network. At the same time, we are implementing our Smart Grid investment program, which is recovered through an existing rate mechanism. We also have a distribution rate case pending before the Public Utilities Commission of Ohio. Later this month, we will be presenting oral arguments directly to the commission, and a favorable outcome in this case will bolster our ability to make the new investments needed to further strengthen AES Ohio's network. Turning to Slide 9. Through 2025, we expect to invest $4 billion to modernize our U.S. utilities. These investments translate to average annual rate base growth of 9% through 2025, which is at the high end of growth projections for U.S. utilities. We expect the earnings from these core businesses to grow in line with the rate base. Turning to Slide 10 for an update on AES Next. We are developing and incubating new products and business platforms through AES Next. Our investments in AES Next help our businesses to be more innovative and competitive and drive value for our customers and shareholders. We are proud that earlier this year, Fast Company named AES one of the 10 most innovative energy companies in the world and the only large publicly-traded company to be included on that list. Turning to Slide 11. The most mature initiative under AES Next today is Fluence, which as of December 31, had 4.2 gigawatts of energy storage products deployed and contracted, and a signed backlog of $1.9 billion. Additionally, Fluence's digital platform, Fluence IQ, recently acquired Nispera, and now has a combined 15 gigawatts contracted or under management, of which more than 80% is with third-party customers. Over the past several months, Fluence has been dealing with short-term challenges mostly stemming from COVID-19 related supply chain issues. Their management team has taken proactive steps to address these challenges, including diversifying battery suppliers, signing new shipping agreements, building out their in-house supply chain team, and regionalizing their manufacturing. Overall, demand for energy storage remains very robust, and Fluence is well-capitalized and positioned to grow as a market leader. We see a pathway for them to improve their margins and grow as the global energy transition continues to progress. Finally, turning to our strategic outlook for the sector, beginning on Slide 12. Our goal is to be the leader in providing low carbon energy solutions while delivering annualized earnings and cash flow growth of 7% to 9% through 2025. Today, there is an unprecedented transformation of our sector underway, with governments, utilities, and companies working to shift to low carbon sources of power. For example, just looking at the public commitment of the RE100, a group of over 350 large corporations who have committed to 100% renewable energy. We expect our annual demand to more than double to almost 400 terawatt hours of renewable energy by 2030. Facing this immense opportunity, we are taking steps to ensure our continued competitive advantage in this once-in-a-generation transformation of our sector. As you can see on Slide 13, this transformation is reflected in our own portfolio as we expect renewables to represent more than three-quarters of our installed capacity by the end of 2025. During that same time period, we expect our renewables business to nearly triple from 13 gigawatts to approximately 38 gigawatts and our capacity from coal to go from 7 gigawatts to zero. With that, I will now turn the call over to our CFO, Steve Coughlin.

Thank you, Andres, and good morning, everyone. Today, I will discuss our first quarter results for 2022, parent capital allocation, and 2022 guidance. Beginning on Slide 15, as Andres highlighted, I'm very pleased to share that Moody's recently completed a thorough review of our consolidated debt and cash flow across our businesses and upgraded AES to investment grade. This conclusion further validates our years-long effort to reduce risk and strengthen our balance sheet and will yield further benefits as we grow our business and attract new investors to AES. As an investment-grade rated company, we will continue to lead the renewable sector while growing our U.S. utility asset base and our long-term contracted generation portfolio. Turning to Slide 16 and the resiliency of our business model. Today, 85% of our adjusted PTC is from long-term contracted generation and utilities. We are largely insulated from the current macroeconomic volatility affecting commodity prices, inflation, interest rates, and foreign currencies, with the vast majority of our portfolio benefiting from contractual indexation, fuel pass-through, or hedging programs that limit our exposure. Combined, these macroeconomic factors had an impact of less than $2 million on our adjusted PTC in the first quarter. For the full year, we currently expect a net positive contribution from these macroeconomic factors as a result of higher natural gas prices and higher power prices in some of our markets. Now turning to our financial results for the quarter, beginning on Slide 17. Adjusted EPS for the quarter was $0.21 versus $0.28 last year. Our core business segments grew by $0.04 over the first quarter of 2021. These positive contributions were offset by several negative drivers we had already anticipated in our 2022 guidance. First, higher losses at AES Next, primarily resulting from COVID-related supply chain issues at Fluence in the fourth quarter of 2021. As a reminder, we report Fluence's results on a one-quarter lag. So the Fluence results relate to their December quarter end, which was disclosed in February and included in AES's full year guidance on our last call. Second, the higher share count as a result of the accounting adjustment we made for our equity units. Third, a higher quarterly effective tax rate than our overall expectation for the full year due to timing. And finally, nonrecurring gains on interest rate hedges recorded last year, which skewed the quarter over prior year quarter comparison. Turning to Slide 18. Adjusted pretax contribution, or PTC, was $207 million for the quarter, which was $40 million lower than 2021, consistent with the drivers I just discussed. I'll cover the performance of our strategic business units, or SBUs, in more detail over the next four slides. In the U.S. utility strategic business unit, or SBU, higher PTC was driven primarily by earnings from new renewables coming online and higher contributions from Southland, partially offset by higher spend at AES Clean Energy due to an accelerated growth plan. Higher PTC at our South America SBU was mostly driven by our increased ownership of AES Andes and higher contracted revenue in Colombia. Lower PTC at our Mexico, Central America, and the Caribbean, or MCAC, SBU primarily reflects the sale of Tablo in the Dominican Republic in 2021 and lower availability at our generation facilities in Mexico. Finally, in Eurasia, higher PTC reflects higher revenue at our Mandan facility in Vietnam and higher power prices at our wind plant in Bulgaria, driven by commodity price increases. Now to Slide 23. We are on track to achieve our full-year 2022 adjusted EPS guidance range of $1.55 to $1.65. Our typical quarterly earnings profile is more heavily weighted towards Q3 and Q4, with about two-thirds of our earnings occurring in the second half of the year. We continue to expect a similar profile this year as we grow more in the U.S., where earnings are higher in the second half of the year based on solar generation profiles, utility demand seasonality, and the commissioning of more new projects in the third and fourth quarters. Growth in the year to go will be primarily driven by contributions from new businesses, including over 2 gigawatts of projects in our backlog coming online over the next nine months, as well as further accretion from our increased ownership of ASMs. We are also reaffirming our expected 7% to 9% average annual growth target through 2025, based on our expected growth in renewables and U.S. utilities, as well as recycling our capital into additional investment opportunities we see across our global portfolio. Now to our 2022 parent capital allocation plan on Slide 24. Sources reflect approximately $1.4 billion to $1.7 billion of total discretionary cash, including $900 million of parent free cash flow and $500 million to $700 million of proceeds from asset sales. On the right-hand side, you can see our planned use of capital. We will return nearly $500 million to shareholders this year. This consists of our common share dividend, including the 5% increase we announced in December, and the coupon on the equity units. We plan to invest approximately $900 million to $1.1 billion in our subsidiaries as we capitalize on attractive opportunities for growth. Nearly half of these investments are in renewables, reflecting our success in securing long-term contracts during 2021 and our expectations for 2022. About 25% of these investments are in our U.S. utilities, to fund rate base growth with a continued focus on grid and fleet modernization. In summary, close to three-quarters of our investments this year are going to renewables growth in our U.S. utilities businesses, helping us to achieve our goal of increasing the proportion of earnings from the U.S. to more than half by 2023. In fact, we have made great progress on our growth investments so far this year, with approximately $650 million already invested primarily in renewables and to increase our ownership in AES Andes. We will continue to allocate our capital in line with our strategy to lead the renewable sector, further anchor AES in the U.S. market, and to decarbonize our portfolio. With that, I'll turn the call back over to Andres.

Thank you, Steve. In summary, our core business continues to perform well. We have attained investment-grade ratings from all three major agencies. We are reaffirming our 2022 guidance and annualized growth through 2025. We continue to deliver on our commitments, including our 2022 construction projects, which we expect to commission on time even with the ongoing Department of Commerce investigation into solar panel imports. We are energized by the immense opportunity for growth in our business and remain committed to maintaining our competitive advantage. With that, I would like to open up the call for questions.

Our first question comes from Insoo Kim with Goldman Sachs.

Regarding the U.S. solar investigation, it’s encouraging to see that our 2022 projects are progressing as planned. For 2023, could you provide more details on the contracted capacity that still needs to be delivered? Additionally, what timing delays, if any, should we anticipate for next year? If there are delays factored into your growth projections for 2023, how flexible can you be in adjusting other elements to achieve your growth targets?

Let me start with a little background on the commerce case. So this case is an investigation by commerce into allegations that one U.S. manufacturer panels and sells imported from four countries in Southeast Asia are circumventing existing antidumping and countervailing duties on solar panels and cells coming from China. We think there are strong legal grounds for commerce to make a preliminary determination before August that will signal to the market that the allegations are unfounded and will be conclusively dismissed without new tariffs. One of the legal requirements for determining that circumvention occurred is that the activity in Southeast Asian countries must be considered minor or insignificant. However, the solar panel and cell suppliers operating in these countries have invested billions of dollars in technologically sophisticated manufacturing, assembly, and processing facilities to ensure that their activities do not appear to be minor or insignificant. Additionally, the critical step of creating solar cells occurs in these countries and not in China and involves the conversion of the wafer into a cell. Commerce itself has previously ruled that this step determines the country of origin for solar imports. For these reasons, we think that there are strong grounds for commerce to make an expedited determination. It's also important to note that there's broad industry opposition to this investigation, including from many U.S. manufacturers because they rely on solar cells from Southeast Asia in order to manufacture solar modules here in the U.S. Currently, the U.S. manufacturing industry can only meet about 20% of U.S. demand and their capacity to increase supply is negatively impacted by this investigation. This further supports the decision by commerce to dismiss the circumvention claim on the grounds that a finding of circumvention would not be appropriate due to harmful impacts. So we'll continue to advocate for a rapid resolution of this case. Now getting specifically to your question, I think what we were able to do this year shows our supply chain management strategy. Many of you will recall that for three years, I've been arguing that this huge wave of renewable demand was coming and that there were going to be shortages of everything, from developers, to land, to interconnections. Now, we've had, I'd say, an additional issue with this commerce case for solar panels. We have gotten ahead of this. What will determine what happens in 2023 for us will be if there's an early resolution or if there is a determination that they take the worst case. If they come out and say that there is a circumvention and there will be tariffs of a certain amount, then people can put cash deposits at that point. I think this would have a very deleterious effect on the whole solar industry in the U.S. However, we would be in a better shape because we're primarily selling to corporates who have more flexibility than people like utilities with RFPs who are much more regulated. So given that, I'd say, look, right now, we don't know. I mean, in the worst case, we continue to negotiate with our clients, with advances. We're not signing them yet because we're waiting for this final determination. But this is not going to stop us. In terms of the construction, it depends on how the case turns out and the shipping backlogs and the rest. It could potentially affect the second half of 2023, but we'll have to see. So we're doing everything possible to minimize this. I think the proof is in our performance. We are one of the few solar U.S. developers who did not have to postpone or cancel any projects this year.

That's good information. The second part of my question is about the possibility of a nonconstructive scenario where delays could become more significant for the entire industry. Regarding your portfolio of global projects, whether in wind, storage, or other areas, how diverse are you? How much flexibility do you have to implement different strategies to maintain growth?

Well, that's a great point. If you think of our backlog of 10.3 gigawatts, only about one-third is U.S. solar. The rest is either international, wind, or other technology. So again, I think that what will happen is that we are a diverse portfolio. We will try to make up elsewhere. However, we think that there are very strong grounds to dismiss this case. Honestly, it doesn't make a lot of legal sense. A prior similar case was dismissed because they didn't have enough standing. Now you have one small U.S. manufacturer, and I think the grounds of this being insignificant or not material are almost laughable quite frankly. It is simply rent-seeking by a few small U.S. players. What is dramatic is that it's had such an effect on the industry. Fortunately, we've been very concerned about shortages for three years. You'll also recall that even with COVID, which first appeared in February of 2020, we talked about the potential effects on the supply chain. So again, stay tuned. I don't think there's anybody in better shape than us. As you point out, we are diverse in terms of technologies as well as geographies.

Okay. That makes sense. My second question quickly. The Slide 43, the sensitivity slide to different moving commodities or currencies or whatnot, is always helpful. I just wanted to update that. I think with stuff like Henry Hub gas prices being almost $8 to $9 right now, just looking at your sensitivity of the year-to-go assumptions. If these commodity prices do remain elevated and with no other changes, it seems like there could be a more meaningful EPS impact for 2022, but that assumes no other changes, whether it’s power prices or whatnot. Can you just walk through at this point with the various commodity price or power price environment? How do you see that net for the balance of the year as it stands today?

Yes, it’s Steve. Just as a reminder, that page, those sensitivities are in isolation. So when you see the gas price sensitivity, it doesn’t include any corresponding power price increase, which we would expect to happen in most cases. So on balance, the environment, we’re really on the net positive side as I said in my comments. In particular, in Bulgaria, we have our wind portfolio there, which has done very well, and I expect we’ll do very well for the rest of this year. It does have some market exposure and with power prices in excess of $200, it’s done very well. The other thing I would point to is our LNG business in MCAC. We have long-term contracted gas that’s been contracted for some time. In fact, there are some upsides that we’re working through and will continue to take advantage of some of the high gas price opportunities to benefit our LNG business. So I think there’s upside there as well. Southland has been another upside we see with the Q3 hedging program, another success. Overall, AES has transformed a lot, and actually, we’re in quite good shape in this environment.

I believe we are on the right side of history with this situation. The fuel aspect is primarily a pass-through for us, as we mainly compete with fossil fuels through either hydro or renewables. The most significant beneficiary of recent developments is Bulgaria, where we have just signed a memorandum of understanding with the government that acknowledges the validity of the power purchase agreement. We are also collaborating on decarbonizing the Maritza project. I really can't identify any negative impacts from this situation.

Our next question comes from Richard Sunderland with JPMorgan.

And maybe just wanted to touch on the 2023 solar outlook a little bit more. Could you speak to a little bit more around the risks there beyond just the earnings delays? Is it really just so much about the timing of the earnings come in? Are there any contractual obligations around energy procurement or elsewhere that you need to fulfill with those contracts?

Yes. No, I'm not aware of any, quite frankly. I think that I don't think it would be demand destruction. It would be a delay in some cases of commissioning them. We obviously wouldn’t have our contracts hold us to have to supply energy if there is a major disruption in the solar panel market. But again, we think that's not the most likely scenario, but if it were to occur, we wouldn't be suffering from loss damages because of not fulfilling contracts.

Got it. Very helpful. And then thinking about the announcements around these recent structured deals, could you speak to a little bit of the capacity, overall appetite there? And then I guess just to be clear on the Amazon front, are those new projects or reflected in the 2021 signings?

Yes. First, most of these are reflected in the 2021 projects. But what I would say is we're seeing a tremendous demand for our structured projects. We have been talking about this year; we weren't able to release some of the names prior until the client was ready. But we can do more projects. The real issue is having the projects in the right market ready. Stay tuned. More is coming. What we really like is it shows repeat buying. We have done projects in PJM, a project in Chile, and now we have big clients. The demand is there. It is a question of how fast we can bring the projects online.

Yes. I would just add that we have the flexibility to pivot to some other markets. We've done Microsoft, we've done Google in Chile. So this Amazon announcement is something I've wanted to talk about for some time, but there's more to come. We have built the pipeline significantly, and that's in large part because we're playing forward the demand coming from our commercial industrial customers by aggregating the pipeline where we know they’re going to need us to supply their load.

Yes. I think an important point is that a good part of this pipeline is in California, and it's quite ready. We started acquiring land and interconnection rights about three years ago, so we got a bit ahead of this wave that we see now. The demand is there. It is a question of bringing all the projects online. Realize that these are versions of 24/7 or round-the-clock renewables. It's not only a question of having the availability to build new megawatts; it’s all guaranteed netted on an hourly basis, renewable energy.

That's very helpful color. I just wanted to follow up real quick on the sort of contracting backdrop. You talked a little bit about more risk weighted into the U.S. signings, obviously, the DSC overshadowing all of these. So can you give us a little bit more color on what you're seeing in terms of discussions to get it active, but you just point to them starting to finalize. Any more information would be helpful there.

Yes, right. We are in discussions, and there are more contracts with clients. A factor is having some clarity in August, as we have to make cash deposits and provide greater flexibility and speed than regulated clients. Let's see what happens. I think it's just going to mean more contracts; this may slow us down. It would basically make renewables in the U.S. more expensive. If you want onshore manufacturing, you need cheap and clean energy. It's a vital factor. But we are in the best shape, I think, of anybody in the sector. Its effects will be much greater outside of AES.

Yes. I'd add that last year, 80% of the contracts were done through bilateral commercial industrial PPAs. The customers that we're working with are very much aware of this issue. We're moving forward with all the details that we can move forward on, and this issue is open. It’s frustrating, but it’s not a good thing. Our customers have made strong commitments to their decarbonization, and we suspect they’re going to want to continue to find their path to get there. Since we're in a bilateral relationship, I think we'll work through that.

And I would add that we're all in favor of onshoring, but what you need is certainty and a timeline. You need to know what tariffs will apply and how. The more you go down the supply chain, the more time it takes to move it. Right now, most of the solar panels we're buying from Southeast Asia have their polysilicon coming from Germany. It’s not even coming from China. This is rent-seeking by a small number of players - or actually one firm, in this case, that I don’t think is delivering even 1% of the supply in the U.S. is significant. So it really is an unfortunate situation.

Our next question comes from Durgesh Chopra with Evercore.

Steve, maybe this one is in sort of your house. I was just going to ask you, as it relates to the 2022 EPS guidance, Steve, can you remind us what you are modeling for Fluence embedded in that guidance? And then obviously, Fluence had some challenges with COVID-19 as Andrés articulated in his prepared remarks. If that continues throughout the year, what kind of flexibility do you have to kind of make that up in other areas of the business?

Yes. So look, Fluence had a difficult first quarter, which, as I had in my remarks, for their fiscal year runs from October to September, and we report them on a one-quarter lag. So what they reported in December is just hitting this quarter that we're now reporting. We had already anticipated updated forecasts for Fluence when we gave our guidance. Unfortunately, I can't say much more. My hands are tied here. They’re a public company and will be releasing earnings next week. However, I feel very comfortable given that I have the latest expectations for Fluence in our numbers. We've already absorbed their first quarter and reported it here. They’ve had a lot of issues, which they've talked about. I think they're working through them. Some are temporary, and they've already worked through new shipping contracts, diversifying their battery supply, and regionalizing their manufacturing globally. So I think it will take some time as they said to work through some of the challenges. But we're confident that the long term is strong. The entire market has continued to be strong. The demand is still there. They had quite the perfect storm of issues coming together. In our guidance, we already included the latest forecast, and it's not knocking us off our guidance range.

What I would add is that the company is well-capitalized and sees strong demand. Increase in battery supply outside of China is happening. The U.S. government has announced incentives for battery manufacturers in the U.S. Point has an agreement with Northvolt for production of batteries in Poland. The main constraint, access to batteries, is beginning to be addressed. It won't be immediate but by next year, more capacity should start coming online.

Got it. That's very comprehensive. Regarding the backlog of additions, you started the year strong, achieving over 1 gig against the 4.5 to 5.5 gig target. It seems you are confident in meeting that goal in 2022, but looking ahead to 2023 amidst the solar investigation and potential delays, what’s the current plan? The long-term expectation of 7% to 9% EPS growth is based on achieving 3 to 4 gigawatts a year. Do you anticipate meeting that, perhaps at the lower end, in 2023? What’s your perspective on that for this year?

So you're talking about signing new PPAs? Are you talking about commissioning of projects?

The new PPAs, Andrés, the target.

The PPAs. Okay. Look, in the first quarter, we did 1.1 gigawatts. So we are on target for our 4.5 to 5.5 gigawatts for the year. As I mentioned, due to this Commerce case, some of the signing of PPAs in solar in the U.S. will be more heavily weighted towards the second half of the year as people will wait until this resolution comes to a conclusion. Do I think that this will knock us off our growth trajectory? No, the answer is no. If anything, it might move things around from one quarter to the next. However, we’re seeing very strong demand for our products. The RE100 will not render their sustainability goals; they will move forward with it. So I feel confident. It could cause some delays in signing PPAs. Yes, we're saying that. However, I think we will have a catch-up. It may make things a little bit lumpier than they would be otherwise, which is not ideal, but that’s the hand we’ve been dealt.

Understood. It sounds like the long-term trajectory is intact; you may have some lumpiness in the near term. But you feel confident long-term in hitting all of our targets?

Our next question comes from Julien Dumoulin-Smith with Bank of America.

I would like to clarify some details further if possible. We previously discussed commodity sensitivities briefly. Can we delve into the longer-term commodity sensitivities and quantify them based on what you have presented in your slides? It appears these commodities are fluctuating significantly, and it seems like the impact could be more than $0.10 positive compared to your last guidance. Is that correct? Can you provide more detail on that? Additionally, considering this directionality, how does it influence your willingness to potentially accelerate the exit from Bulgaria? I want to understand that better and also see how it relates to other impacts like solar or Affluence while remaining within or even exceeding your projected range.

Sure, Julien. You're right. You're looking through the page on the commodities and seeing that there's actually upside here. As I described in Bulgaria, where the power prices are high, we're seeing significant upside, both in the near term as well as in the value of the Maritza plant, which is under contract, but that PPA is well in the money for the government of Bulgaria. In addition, we have the upside in the wind plant. In our LNG business, in our gas businesses in Central America and the Caribbean, we have long-term gas contracts that were set well before this commodities environment. We have flexibility in how we manage by swapping to liquid fuels and redirecting cargoes into Europe. So this is really important diversification of our portfolio. We see with both power prices as well as the upside in our position in natural gas, given our long-term contracts. But directionally, you are correct. I wouldn’t venture to say whether it’s $0.10 or exactly at this point. Some of that relies on discrete transactions that we have done and will do to take advantage of that upside in LNG.

Yes. Talking about Bulgaria, I would say that in the past, the PPA had been questioned before the sort of anticompetitive legal state. We’re getting past that. This is a confirmation of the PPA, and it is a very attractive asset. Maritza is a very attractive asset through the end of its contract period and beyond. It is essentially doing what the reason it was built was to make Bulgaria independent of Russian gas. The asset is much more valuable today than it was, say, six months ago. We’ve also agreed to help the Bulgarian government look at energy storage and other alternatives to wean Maritza away from just running on coal. So stay tuned, this asset has been the big winner from this horrible situation in Europe.

Understood. I want to clarify some of the qualitative comments regarding the AD CVD risk for 2023. It seems you are reaffirming the origination ranges for next year and expressing confidence in that. Can you quantify any of these risks, such as origination risk or the impact of higher costs? I want to ensure we have complete clarity on this matter.

Yes. Look, we continue to negotiate with our clients. This has pushed off the final signing of a number of additional PPAs because there's uncertainty about the tariff. The effect will depend on whether August provides enough clarity, and it should. There should be an indication of how much the tariff would be and how much you would have to put in sort of cash deposits, even though it might be finalized later. However, those typically don’t move up or down drastically. So we think we could work with that. However, the biggest issue for us is whether the suppliers continue to run their factories in Southeast Asia and whether you have a decrease in the global supply of solar panels. That’s a little bit more the issue. We're doing everything possible to ensure our suppliers will be able to continue running. Stay tuned. By August or possibly earlier, we hope to have clarity.

Got it. All right. Fair enough. And then just the last one related to Fluence. Obviously, it’s a trailing impact, et cetera. It seems it's still strategic to you from an origination perspective and your sales efforts, right, regardless of the results?

Yes, I'm optimistic about Fluence in the long run or the medium term. It is very difficult to launch a new product when you get hit by COVID shutdowns in China. Some of the battery suppliers had issues as well. So there were tremendous shipping issues that they had to face. Fluence is a well-capitalized firm. The product is good; digital is expanding well. They’ll talk about these things in their earnings call. For us, it has helped create a market for energy storage, solar plus energy storage. Our 24/7 relies on energy storage. If a version of the climate-plus bill gets passed, clarity around green hydrogen will require a lot of energy storage. Yes, it is a strategic relationship, and we hope to grow together for years to come.

Our next question comes from Agnieszka Storozynski with Seaport.

So my first question is about the timeline of your coal plant retirements. We seem to be in this new gas price environment, basically everywhere in the world. We haven't yet heard many companies change the timeline, but there is money to be made on continued operations of some of these assets. So that's one. And then a second question, a little bit more longer dated, I guess, is that so far, when you see the reasons why C&I customers signed renewable power PPAs, they mentioned decarbonization as the main driver. We haven't yet heard much about economic renewables, and it's probably the inflation and equipment prices doesn't help. But are you expecting the second wave of demand from C&I customers as we are in this higher power price environment probably for years to come?

Yes, those are great questions. Look, first on the first one, we have to reach our goal by 2025. So it's a question of trying to sell these assets or shut them down at times that are most appropriate. So the shutdowns are discussed a lot with the local system operator or the Ministry of Energy. I don’t see our goals being affected by what's happening now. Some of these plants' values are higher in certain locations, again, Maritza being the prime example. Some shutdowns may be somewhat delayed because they must run in terms of availability of natural gas. But it doesn't change our goal of getting rid of all coal plants by 2025. The second question is I'm really glad you asked it because the companies are committed to their decarbonization goals. They won’t just abandon them because of the case before commerce or because of slightly higher construction costs. The main issue is not energy; it is capacity. How to keep the lights on 24/7. You have two choices. Continue to run your legacy assets, whether gas or coal, combined with renewables. As people go further on this journey of decarbonization, that will drive strong demand for energy storage, lithium-ion based energy storage. It is a supply issue, and can you get enough batteries to meet this demand? The more batteries available, the sooner you could retire fossil plants. But on a cost equation, renewables are more competitive than ever, even with the recent crisis.

Our next question comes from Gregg Orrill with UBS.

I was wondering if you could comment on what got Moody's to investment grade. Anything you wanted to highlight there?

Look, this has been a decade. If you look at any of our statistics regarding our exposure to commodities, if you look at the fact that we're almost 88%, I think, in dollar, 85% contracted. All indicators are very strong. Our cash flow has been really strong for a long time, but I'll pass it off to Steve.

Thanks, Andrés, and for the question, Gregg. I was hoping someone would mention it. We're very proud of the Moody's achievement. This is the third of three and fully solidifies our investment-grade status. It is something the team set out to do a long time ago. I can't claim too much credit for it. It really goes to John and the team. Moody's looks at our consolidated debt across all our businesses, looking at the cash flow. They did a very deep review of the overall risk profile of our businesses, our commercial structure, long-term contracts, dollar-denominated revenues, and growth in our utility. It was a combination of strengthening the balance sheet, increases in our cash flow, and that business mix. We were in Moody's territory for four quarters straight, so this was something that was very obvious we deserved, and we're proud of it. It is a validation point for our transformation.

Yes. I would highlight what Steve said: that Moody's methodology is different. It takes into account not only the non-recourse debt but also recourse debt. So in our case, it's about $3.5 billion of recourse? $14.3 billion of non-recourse. This tells you that all our subsidiaries that they have confidence in the cash flow coming from ourselves, and most of our subsidiaries are investment-grade rated. It was a decade in the making, but the team did a fantastic job in the last year to get this across the finish line.

The third confirmation has created a bright line for some investors. Having this all locked in will likely attract some new investors to the company now.

Our next question comes from Ryan Levine with Citi.

Given your favorable view of the DOC outcome and balance sheet strength, are you looking to be more acquisitive and new in development, third-party solar projects?

Look, we are seeing that clients are coming to us and asking if we can do projects that other people have walked away from. Now what we’re mostly interested in the states are these 24/7 solutions. The Department of Commerce case, we feel that the legal case is very weak. Furthermore, if you look at the objectives of decarbonization of onshoring, this actually moves us in the wrong direction. We continue to see opportunities to acquire projects that help us meet our clients' demands.

I appreciate the color. And then I guess one follow-up from earlier. Are you going to break out the Bulgarian wind contribution for the quarter?

We did not break that out for the quarter. It’s probably best to discuss it for the full year. But we expect it will be a few cents for the full year.

That concludes today's Q&A portion of the call. I will now pass the conference back over to Susan Harcourt for any closing remarks.

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, and have a nice day.

That concludes today's AES first quarter 2022 financial review conference call. Thank you for your participation. You may now disconnect your lines.