Good morning and welcome to the AES Corporation Fourth Quarter and Full-Year 2022 Financial Results Call. My name is Candice, and I will be your moderator for today’s call. I would now like to turn it over to our host, Susan Harcourt, Vice President of Investor Relations. 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 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 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 3. I am very pleased with our performance in 2022, which was our best year ever. Adjusted EPS 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 4, 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 2 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 5, 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 6, 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, interconnections, and permitting work to advance the projects that will be used for future PPA signings. Turning to Slide 7, we also established ourselves as a leader in green hydrogen. In December, we announced a partnership with Air Products to develop, build, 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 8, 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 base by 9% annually through 2025. Specifically, at AES Ohio, we filed a new electric security plan or ESP 4 to enhance and upgrade the network and improve service reliability. With the lowest rates in the state across all customer categories, AES Ohio is well-positioned to make the much-needed customer-centric investments. A ruling by the Ohio Commission on ESP 4 is expected this summer. Finally, we're pleased with the constructive outcome of AES Ohio's distribution rate case in which the Ohio Commission approved an annual revenue increase of $75.6 million. At AES Indiana, we filed our integrated resource plan for IRP with the Indiana Utility Regulatory Commission in December. AES Indiana's near-term plan includes the conversion of the utility's last two coal units to natural gas in 2025 using an existing on-site 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 9. 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 of 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 U.S. 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 gigawatts 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 U.S. where the benefits of the Inflation Reduction Act 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 Coughlin.

Thank you, Andres, and good morning everyone. Today, I will cover the following key topics: our financial performance during 2022, our parent capital allocation, and our 2023 guidance and expectations through 2025. As Andres mentioned, our results for 2022 demonstrate the strength, resiliency, and flexibility of our portfolio as we surpassed our guidance range of $1.55 to $1.65. Overall, our portfolio was well-structured to perform in the current market environment and is well-positioned for growth as AES continues to lead the global energy transition. Turning to Slide 13, full-year 2022 adjusted EPS was $1.67 versus $1.52 in 2021, driven primarily by a significant volume of LNG sales and our increased ownership of AES Andes. These positive drivers were partially offset by unplanned outages, several one-time expenses we recorded at our U.S. and South America SBUs, a higher share count as a result of the 2021 accounting adjustment for our equity units, and higher parent interest stemming from higher debt balances. The $1.67 per share also includes approximately $0.12 of losses from AES Next, primarily from our ownership in Fluence, which served as an additional drag year-over-year. We expect Fluence's results to significantly improve beginning this year as they discussed on their recent earnings call. Turning to Slide 14, adjusted pretax contribution or PTC was $1.6 billion for the year, an increase of $149 million and 11% growth over 2021. I'll cover our results in more detail over the next four slides, beginning with the U.S. and utilities SBU on Slide 15. Lower PTC in the U.S. was primarily driven by the recognition of one-time expenses from previously deferred purchased fuel and energy costs at our utilities, outages at Southland Energy and AES Indiana in the second quarter, and lower contributions from Clean Energy and the retirement of our coal plant in Hawaii. This was partially offset by higher contributions from our Southland legacy assets in the third quarter. Higher PTC at our South America SBU was primarily driven by our increased ownership of AES Andes and higher margins at both AES Andes and AES Brazil, but partially offset by a prior year gain related to an arbitration at Alto Maipo, outages at AES Andes, and a one-time regulatory provision in Argentina. Higher PTC at our MCAC SBU reflects the benefit from a large volume of LNG sales redirected to the international market. As I'll discuss later, we do not expect an opportunity of the same scale to recur this year and anticipate lower PTC from MCAC in 2023. The LNG sales were partially offset by the full-year impact from the sale of our coal plant in the Dominican Republic in 2021. Finally, in Eurasia, adjusted PTC was relatively flat year-over-year with an overall net decline driven by higher interest expense, but partially offset by higher energy prices earned at our wind plant in Bulgaria. Now, let's turn to how we allocated our capital in 2022 on Slide 19. Beginning on the left-hand side, sources reflect $1.3 billion in total discretionary cash. This includes parent free cash flow of $906 million, which was near the top end of our guidance expectations. Asset sales were below our expectations for the year, but we still expect to achieve our goal of $1 billion in proceeds by 2025. Given the delay in asset sales, we accelerated the issuance of some parent debt, which is within our long-term expectations. Moving to uses on the right-hand side, we invested more than $700 million in growth at our subsidiaries, of which approximately two-thirds were in the U.S. We also allocated nearly $500 million of our discretionary cash to our dividend. Turning to our guidance and expectations, beginning on Slide 20, today we are initiating 2023 adjusted EPS guidance of $1.65 to $1.75. This year, we expect to commission approximately 3.4 gigawatts of new renewables, which is the largest year-over-year increase in AES history. This growth further validates AES' position as a leader in renewables and highlights the outstanding efforts of our commercial and operations teams in our markets. Roughly 65% of this new renewable capacity is located in the U.S. More than half of our total 2023 adjusted PTC will come from the U.S. this year as we execute on the transformation of our portfolio. As I discussed last quarter, our U.S. renewables projects benefit from both investment tax credits and production tax credits. Our 2023 guidance includes approximately $500 million of adjusted PTC from tax credits generated and recognized by new U.S. renewable projects coming online this year, which is approximately double the amount from 2022. Tax credits are an important component of our renewables business earnings and cash flow, and we intend to provide updates on our 2023 tax credit expectations throughout the year. While the midpoint of our 2023 guidance range is below our long-term annual growth target, we are reaffirming the 7% to 9% growth rate through 2025. 2023 growth is lower than the long-term trend for a few reasons. First, we've taken a conservative approach to modeling renewables projects expected to come online in 2023. Our renewables construction is typically concentrated in the fourth quarter, and this year will be no exception. As a result, construction delays of only a few days could cause a project to shift from 2023 to 2024 and negatively impact this year's results. This is particularly relevant for our U.S. renewables projects where we recognized significant earnings from investment tax credits in the year a project is placed into service. Of the 2.1 gigawatts we plan to complete in 2023, two-thirds are expected to come online in the fourth quarter. Our guidance assumes that an additional 600 megawatts of projects currently scheduled to come online in December slip into 2024. If some or all of these projects are completed on schedule, this will create up to $0.10 of upside to our 2023 guidance. It's also important to note that even if there are delays to next year, this is only a timing issue with no material value impact and would support higher growth in 2024 with no impact on our long-term growth rate expectation. Second, we expect to see lower contributions from our MCAC SBU on a year-over-year basis, primarily driven by more than $200 million of adjusted PTC from LNG sales we executed in 2022. Our commercial team was able to leverage the optionality embedded in our LNG supply contracts to capitalize on high international gas prices by redirecting Henry Hub-linked LNG cargoes to the international market. Although LNG sales will continue in 2023, we do not expect the same magnitude of opportunity as the spreads between Henry Hub and international gas prices have compressed and more of our gas supply this year is linked to TTF international prices rather than Henry Hub. Third, we expect to see lower margins at our Chile business this year, particularly in the first half of the year, which is a temporary impact of our Green blend and extend strategy to transition our customers from coal power to renewables. Several coal PPAs have or will expire this year as we proceed with our intent to fully exit coal by 2025, and others have been restructured to be priced off renewables that are still under construction. We view this as a short-term cost of decarbonizing our portfolio and do not expect any impact to our 7% to 9% long-term growth rate. Looking ahead, our teams are working on commercial solutions to mitigate the dilution as the portion of our earnings from coal continues to decline. Based on the drivers discussed, we expect our 2023 earnings to be significantly second-half weighted, with approximately three-quarters recognized in the second half of the year. While we typically have had about two-thirds of our earnings in the second half, the increase in seasonality this year is driven by the significant volume of new U.S. renewable projects coming online in the fourth quarter. Now, turning to our 2023 parent capital allocation plan on Slide 21, beginning with approximately $2.2 billion of sources on the left-hand side. Parent free cash flow for 2023 is expected to be $950 million to $1 billion, in line with our annualized growth target. In addition to parent free cash flow, we expect to generate $400 million to $600 million in asset sale proceeds this year. This includes our previously announced sale in Jordan, as well as the pending sell-down of some of our operating renewables in the U.S. I also want to point out that we intend to relaunch the sale process for our Mong Duong coal plant in Vietnam to better align with the approval requirements that became clear during the initial sale. The remaining portion of our 2023 asset sales is expected to come from additional sell-downs and sales supporting our decarbonization goals. Now, to the uses on the right-hand side. We plan to invest approximately $1.7 billion toward new growth, of which about two-thirds will be allocated in the U.S. to renewables and to increase our utility rate base. We expect to allocate approximately $500 million to our shareholder dividend, which reflects the previously announced 5% increase. In summary, we exceeded our financial commitments for 2022 and are confident in this year's guidance and the long-term outlook for AES. The energy transition provides tremendous investment and innovation opportunities, and I believe no company is better positioned than AES to lead this transition. As we execute on our strategy, we will continue to deliver on our financial commitments to maximize per share value for our shareholders. With that, I'll turn the call back over to Andres.

Thank you, Steve. In summary, 2022 was our best year ever. Not only did we meet or exceed our targets for adjusted EPS and parent free cash flow, but we signed more PPAs and added more renewables to our portfolio than ever before. Once again, we were recognized by BNEF as the top developer worldwide, selling clean energy to corporations through PPAs. We also launched the first mega-scale green hydrogen project in the U.S. and developed a regulatory foundation that will enable us to grow our U.S. utilities by 9% annually through 2025. Looking forward, we are very well positioned for the future. Our leadership in corporate PPAs and green hydrogen gives a line of sight into our continued success. We remain focused on executing our construction program and further developing our pipeline of potential future projects, and we are on track to exit coal by the end of 2025. With that, I would like to open up the call for questions.

Thank you. Our first question comes from Angie Storozynski. Your line is now open. Please go ahead.

Good morning, guys. So first, maybe about the disclosure that you guys have in your presentation; I understand that there's an Analyst Day coming, but there are a number of slides that are missing, especially the segmental earnings contributions for 2023. I mean, is there any reason for that?

Yes, Angie, hey, it's Steve. So yes, and that's because, as Andres shared in his remarks, we are intending to update you on our new business segments. And so when we issue that level of guidance, it will come in the Investor Day.

Okay. I understand. Okay. Just moving on, just looking at the year-over-year bridge between 2022 and 2023, there is no benefit from lower losses of AES Next. And I'm just wondering, I mean, it's not even mentioned as a driver. Can you comment about your expectations for that business?

Yes. So Next, in total, Angie, was roughly a $0.12 drag last year. We have to be careful because Fluence is a separate public company, and we can't get ahead of their disclosures. They haven't specifically guided earnings, but on their last call, they did guide to a significant improvement in margins this year. So, Next is a positive driver this year, and I would say, to a material extent, but I can't say specifically because I can't get ahead of them on their earnings disclosures. But we are expecting it to be much better. They've made a ton of progress on all of the operational and commercial improvements that they've been outlining. And as I've said previously, the Next portfolio we expect to be neutral to earnings by 2024, and I still expect that.

Okay. But I'm just – so again, not to be picky, but so which bucket would this be included in? I mean, on that Slide 20, I understand it's lumped with some other drivers. So, would it be based on the upside to the guidance?

No, it would be lumped into that second column with the negative – it would be an offset in that negative $0.15, basically.

Okay. Okay. I understand. Okay. And then just one other question about 2022. So, when I'm looking at the actual results versus what you were guiding to, the corporate drag is more than $100 million higher than expected. And I'm just wondering, I understand some of it is interest expense, but any other driver?

The corporate does include AES Next, under our current segments. And so, we'll be talking more at Investor Day about the future, but I can say, it's largely parent interest on the revolver, where we've had higher balances and of course, higher rates going into the revolver, as well as the incremental drag from AES Next.

Okay. Thank you. And then the core question. So, based on the IRA, I mean, there’s this discussion about shifting from solar ITC to solar PTC; there's obviously the bonus ITC. And I'm just wondering how are you positioned to benefit from those additional tax credits in the U.S.? And also, I mean, it's a very competitive market, as I understand. So, can you actually retain some of this benefit, i.e., boost the profitability of future solar projects in the U.S. or is it more a function of basically securing more contracts by trading away that benefit?

Sure. So, look, first of all, we're very happy to have the optionality from the IRA on choosing ITC or PTC newly for solar, as well as having the ITC for storage. So, typically we're going to choose the tax credit structure that yields the highest return in the project. So, it's great to have that optionality. I would say, going forward, the ITC – there is a difference in the earnings profile. There's an upfront recognition of the ITC versus the PTC is spread out over 10 years, but other than that, you'd expect the lifetime earnings roughly to be the same if the credit structure yielded roughly the same returns. So, in this case, we have about – in AES’ case, about one-third of our pipeline, we believe will qualify for the energy community adder. And so, we feel that we're going to be very competitively positioned to get at least the 40% level for about one-third of our pipeline. So, that's a good thing. I would say in terms of where the credit accrues, I think it's going to be a mix of things. Certainly, there's been higher costs that the industry has absorbed on the order of 30%. I think part of it goes to absorbing that impact of higher costs in renewables. I would say some will go to competitiveness in terms of bidding for the PPAs. And largely, as Andres has talked about before, we see there being more of a constraint on the supply side in the renewables market. So, we do see that continued strong demand, but that there are going to be constraints on the supply side of projects being ready to meet that demand, and that will have some upward pressure on returns.

Yes. Angie, the way I'd put it is that the cost increases have largely been absorbed by the market. So, we're seeing constant margins. What you saw last year, there was less commissioning of new projects in renewables than it was expected by a big factor, like 40%. So, what a lot of the clients have done is postponed some of their renewable goals, but eventually, what you're going to see is a shortage in the market. So, we feel confident about that, and that's why we're continuing to invest to build that pipeline to respond to that demand. So, those are the dynamics. This is a market that, yes, while it's very competitive, the dynamics are positive. And then we are also selling a lot of our projects as differentiated projects. So, they're structured projects. They bring something to the table other than just your basic PPA.

Great. Thank you.

Our next question comes from the line of Nick Campanella of Credit Suisse. Your line is now open. Please go ahead.

Hi, good morning. Thanks for taking my question. This is for Nick today. First, a quick question about the Analyst Day. Can you share your thoughts on the timing? I know you mentioned spring, but what are some specific factors that will determine when the Analyst Day will be held?

Yes. I mean – so first of all, Andres mentioned, we will be discussing new business segments. So, we are closing out 2022 under our current segments. We will then move over to new segments very shortly. And so, part of the timing is to fully make that transition internally and then to be able to come out in the spring time frame with that look at the new segments, the new way of looking at AES going forward, as well as discussion about guidance beyond 2025.

Okay. That's helpful. Thanks. And just maybe just on the asset sales proceeds. I know you're feeling some of the add to sales proceeds with the parent debt issuance, but as we think about the current CAGR, can you just – are you able to continue to bridge this growth rate without any additional common equity? Just want to check in on that.

Yes. Look, we feel confident in terms of what we've said in the past that to grow through 2025, we don't need additional equity for that period of time. So, we also feel confident in our ability to raise $1 billion through asset sales.

Yes. Yes. And with regard to the debt, it's really just – it's somewhat fungible. We look at both our sales program as well as our debt capacity, always holding to our investment-grade metric, plus a cushion as a minimum, but it's really just timing. So, there's just flex between when we determine to issue the debt within our expectations and when those asset sales come in. So, it's just executing somewhat of a flexibility on the timing of the asset sales and the debt kind of flex back and forth.

Great. Thanks for the color. I appreciate and I’ll back to the queue. Thanks.

Our next question comes from Durgesh Chopra of Evercore. Your line is now open. Please go ahead.

Hi, good morning team. Thank you for taking my question. Just, kind of – I want to focus on the plan for this year 2023, that is, what's the level of confidence? I mean maybe you can share some details with us in terms of what you already have in terms of material secured, et cetera, et cetera, and getting the, sort of the 3.4 gigawatts online and getting the $0.27 earnings accretion year-over-year.

Okay. Hi, Durgesh. Listen, we feel good about the numbers that we're giving out there. We have all the equipment basically secured. And we're very – I'd say about what we have about 5.5 gigawatts under construction as we speak. Okay. Not all of them are going to come in line in 2023. But just to give you an idea, we feel very good about it. Now, the 600 megawatts that we said might slip into 2024. What are the issues? Well, for some of that, there could be equipment delivery. There could be interconnect timing, easement issues, permits, the usual stuff that when you're doing construction. So, we're going to try very hard to get it done this year, but we feel it's prudent to say that these are going to slip most likely, slip into 2024. Now, what I would like to reiterate is that this really isn't a business issue. This is just an accounting issue from my perspective because we – all of those 600 megawatts, I feel very confident would get done, for example, by – certainly by March. So, there aren't any penalties involved and there isn't any significant change to the return of those projects. So, unfortunately, what you really have is given that we run on a calendar year. We have so much happening in the last quarter. But I want to really emphasize this is not a – we have – of all the renewable developers, we have not abandoned any project because of equipment delays or permit delays. We have delivered on time. So, we feel very good, but there is a timing issue, and we thought it prudent to say, look, these 600 megawatts, we think are most likely to fall into next year. But it's a matter of – it could be weeks. And we will nonetheless try very hard to get them done this year.

Thank you, Andres. That's very helpful. And just in terms of milestones for us to watch, as to whether you can get them done this year or are they going to push next year? When are you going to have that clarity? Is that, sort of kind of a summer type of event or will you have more clarity by your Investor Day?

I really don't think we'd have it honestly, by our Investor Day, to be frank. I think it'd be more by the summer that we would have more indications on particularly the project. This gets quite granular. Projects got a permit or something that was missing, but I really don't see that before that.

Yes, Durgesh, our plan is – just on each call, we will give updates to the extent we have updates on the construction program, as well as the tax credit expectations throughout the year on the calls as well.

Got it. And thanks, Steve. And just one last one. I noticed the 2023 to 2025 PPA finding is, again, very healthy 14 gigawatts to 17 gigawatts, but you're not, sort of giving us an annual number this year like you did in 2022, which was 4.5 gigawatts to 5.5 gigawatts and you came in right in that range. Are you expecting that 2023 to 2025 signings to be lumpy or should we still expect right, the new PPAs in the range each year?

I would expect, honestly, them to be right around that sort of 4.5 gigawatts, 5.5 gigawatts every year, but we decided to give a multi-year range because there is some lumpiness. I mean, we do have some projects, which are like 1 gigawatt. And it's the same thing. The signing could happen in January instead of December. So, we wanted to give a – basically, think of it more as sort of a rolling number, but again, we feel good about being able to reach that range.

Got it. Thanks guys. And congrats on the BNEF recognition again this year. I appreciate the time.

Thanks a lot.

Our next question comes from the line of Julien Dumoulin-Smith of Bank of America. Your line is now open. Please go ahead.

Hi, there. Good morning. This is actually Cameron Lochridge on for Julien. Thanks for taking my questions. I wanted to maybe come back real quick to the idea of the renewal with backlog and how maybe that influences the 7% to 9% growth CAGR that you guys have laid out. I appreciate that we reaffirm that through 2025, but given where the backlog is and where the growth is expected to come from over the next several years, is there any reason we should not be perhaps rolling that forward out beyond 2025 and continuing to underwrite to that or is there something else that may be driving that either higher or lower beyond 2025?

Yes. I mean, look, let's say, we have a 12.2 gigawatt backlog, of which about 5.5% are under construction now. And a good portion of that is going to come online between now and 2025. So, there's no reason to think of a change. If anything, the market continues to grow, and we see a shortage. I don't know if – Steve, you want to comment…

Yes, I would say the backlog is at 12.2 and we're delivering 3.4 this year plus potentially some of that upside from the 600. So that leaves still about 8.5 to be delivered over the next few years. So, we feel really good about the commissioning coming through 2025 to support the growth. And then as Andres has covered, the pipeline in the U.S. is 51 gigawatts and it is continuing to mature. So, we'll talk more at Investor Day about beyond 2025, but I feel really good about the growth expectations.

Yes. This is not a market that is not growing very rapidly. And we do see pent-up demand. What we do see is that because a lot of people did not deliver in 2022, we see pent-up demand. So, what we have to do is really make sure that we're getting the returns that we want and really going after the value-add on those projects, but it's not for a shortage of projects by any means.

Understood. Understood. Thank you both. Maybe just going back to 2023 and looking at guidance, I know you're looking at $0.27 a share from the new renewables in 2023. I kind of wanted to unpack that a little bit. In terms of how much, if you could quantify, how much of that $0.27 is, you know we'll call it a roll forward from projects that were placed in service in 4Q 2022? And is there any reason that was meaningfully different or will be meaningfully different this year thinking about the $0.10 a share that could potentially slip into 2024?

Yes. So, the primary portion of that relates to the increase in the tax credit. So, a portion of the $0.27 is related to just that base of projects from 2022 coming into 2023. So that's part of it. But I would say the largest component is the increase in the tax credit to the range of about $500 million recognized this year, which is a little more than double what we recognize that last year. So, that's the largest component of the $0.27.

Okay, I understand. Please continue. I apologize.

Yes. I was also just going to say, and that's partly why we're calling out this additional 600 megawatts because it's largely – in fact, it's all investment tax credit-based projects. So, as Andres described in the most extreme, even if you just had a project that was commissioned on January 1 instead of December 31, you would move that tax recognition over a calendar year. So that's why we're calling out that as potential upside and the sensitivity to the tax credit; and it’s just timing is all it is.

Yes. The other thing I'd point out is, when we sell the tax credits, we also get the cash.

Exactly.

Got it. Okay. That would do for us. Thank you guys both.

Thank you. Our next question comes from the line of Richard Sunderland of JPMorgan. Your line is now open. Please go ahead.

Hi, good morning. Thanks for the time today. Just one last one on this 2023 versus 2024. It sounds like if the $0.10 looks to 2024, this clearly should be additive to the prior growth outlook, meaning attitude to the 7% to 9% CAGR. Is that the right frame of reference for whether the 600 megawatts push into 2023 and brings you kind of back to the original range or 2024 pushes you above?

Exactly. So, that's exactly right. It doesn't change the 7% to 9% through 2025, but all else being equal, 2024 would go well above the 7% to 9% as a result of these projects moving into next year. That's exactly right.

Okay. Got it. Very clear. Thank you. Turning to Ohio, you asked before, any sense on the backdrop in conversations there after all the time and engagement around the rate case?

Yes. So at this point, as Andres said in his remarks, the ESP 4, we're expecting to be decided this summer. So that was filed last fall. The commission did issue the order on the distribution rate case back in December, which was very favorable to us. And so, really those rates are just pending the approval and finalization of the ESP 4. So – and keep in mind, the ESP 4 has a couple of things that are very additive. So, one is that it will catch up the investment that's occurred between the last rate case filing in 2020, close to the point in which the ESP 4 was filed last year. So, there's a catch-up there. There's also a new framework for investment going forward, including a distribution investment rider, as well as some additional riders that will result in faster recognition of investment going forward. So, our expectation is that we'll see the new structure in place that sets Ohio on the course for new investment for the second half of this year, and then it becomes a growth driver going forward into the next several years. We see in total our net rate base increasing close to $1.5 billion across both utilities from now until 2025.

Understood. Understood. Thank you. And then you reference changes around the Vietnam requirements for sale and relaunching that transaction. Could you just parse that a little bit more in terms of what you're expecting there now? Do you see a quicker path to divestment under a second go, anything else would be helpful here?

Yes. Well, we hope so, and then it will be a second time around. I mean, basically, what happened here is that the government wanted more of an operator than a financial investor. They're very happy with us, and they want somebody equally good. So, we feel there are a number of people interested in the asset because they actually canceled a number of new coal plants that were going to be built. So, there's an appetite, especially from Asian operators for this asset. So, hopefully, it will be faster. It was somewhat of a surprise, but our intentions remain the same. So, to be out of coal by the end of 2025.

Got it. Thank you for the time today.

Our next question comes from the line of Steve Fleishman of Wolfe Research. Your line is now open. Please go ahead.

Yes, thank you. Andres, maybe could you give us just some overall color on how things are proceeding on panel supplies and particularly you flip up implementation issues. And is that kind of a key variable in the timing of these projects or is it more other issues?

Let's see. Well, we feel pretty – we feel good about the panel issue. As you know, again, we got all the panels we could use in 2022. So, in 2023, we have all the orders in. Our suppliers have been getting through. So, again, we feel good about that. In terms of what would determine that last, sort of 600 megawatts, it's really a combination of issues. It's not just solar panels. It runs the gamut from wind turbines, deliveries, etc., easements, also the interconnection timing; is the client ready to take that energy. That was one of the biggest issues we had in 2022. We were ready, but the client wasn't ready. So, it's just a bag of different issues. I'd say an important issue going forward is, as you know, we're heading the solar panel buyers consortium. We want to have solar panels starting to be delivered late 2024, 2025 made in the U.S.A., and what we're seeing now is really one of the regulations may be issued by treasury, what constitutes domestic content to get those additional credits. So, I'd say that's an item that we're watching very closely, but generally, we feel good about. And there are certainly people interested in locating that flat here to supply that contract.

Okay. I know this was discussed on the last call, but how are you deciding between ITC and PTC for U.S. projects? I remember you mentioned that PTC still holds significant value in tax equity and depreciation, but do you anticipate a shift in this area as you move forward with future projects?

Yes, I do, Steve, now that we have the optionality for production tax credits on solar, I would see that option being exercised primarily in the sunniest places in the U.S. So, in the Southwest U.S. projects where the production-based incentive is going to yield a higher value than necessarily the CapEx based on the capital investment-based incentive. So, we are modeling more production tax credit into our longer-term outlook. For this year, it's not – I wouldn't say, it's impacted us really at all this year because for the most part, we're locked into a tax credit structure election and a tax equity partnership that we've already agreed to. But going forward, we'll start to see more production-based incentive come into the mix. And that's something, again, for Investor Day, as we talk about beyond 2025, kind of how do we look at the business, how do you look at the metrics of the business, how do you look at tax credits distinct from earnings that don't include tax credits, things like that, that we'll be giving more guidance on to help people understand what that looks like going forward.

Okay. Thank you.

Our next question comes from the line of Gregg Orrill of UBS. Your line is now open. Please go ahead.

Hi, thanks for taking my question. I just wanted to, sort of confirm where the credit goals are, sort of with the guidance update and the segment – the new segments that you're thinking about? Sorry, if I'm getting ahead of my questions.

No, no, no. No problem. Are you referring to the tax credit?

I think the credit rating, right?

Credit rating, okay. We've been talking so much about tax credit. So, yes, the credit rating, certainly the BBB- is a constant constraint. And then we see likely improvement going forward, particularly as our business mix evolves to more long-term contracted renewables and more investment in the U.S. utilities. So, I would say that’s going to be a driver of improvement to the overall profile and view on the source of where our cash is coming from going forward. The segments, there's no – I can't say too much about that right now. As we've been operating under the current segments, we'll be moving to the new one soon and then talking about that on the call going forward, but the segments will make it very clear as to the sources of earnings and cash going forward and where the business is growing, frankly, much, much higher than 7% to 9% and where the business is shrinking, largely consistent with our decarbonization goals. So, it will peel apart where that 7% to 9% has come from beyond 2025.

Yes. So Gregg, in terms of the credit rating, we're already more than 50% of our earnings are coming from the U.S. and a higher percentage is coming from renewables. So, we already have a – if we're growing 7% to 9%, that includes the dilution from getting out of coal. So, actually, our renewables are growing at a much higher rate, more like 10% to 12%. So, to put that in context, all of those things point to an improvement, as Steve was saying, in terms of the quality of the numbers beyond the metrics. So, again, we feel very confident in what we've said. This is a red line. We're not going to drop below investment grade, and we're going to continue to strengthen it.

Thank you.

Thank you. Our next question comes from Ryan Levine of Citi. Your line is now open. Please go ahead.

Good morning. Hoping to follow-up on the change in terms of the change in segmentation, maybe just to take a step back, what's prompting the re-review of how you're looking to disclose information? And is there anything that any re-review would signal strategically for the company?

No. I mean we really think this is a culmination of what we've been doing in terms of moving into renewables. And our business is long-term contracted. And what we're seeing is a lot of this would make our business we feel more transparent and more comparable to other people's businesses. So, that's all I can say at this point, but it's something that I think you guys will welcome because it gives greater transparency. And I think it makes more and more sense as, again, we transition more to renewables.

Okay. And in your guidance, you disclosed a step down from the LNG contribution for this calendar year. What are you assuming for the TTF Henry Hub spreads or upside or contribution from that portion of your contract portfolio?

Well, I'll say the two elements. One is that we have less gas available to take advantage of that opportunity because we had a step down in our Henry Hub-based gas contracts. The second is, has to do with the spread between Henry Hub plus and TTF. So, those spreads have narrowed. It's been a very warm winter, especially in Europe. So, we'll see. So, that's an opportunity that exists there, but we're not – it would be smaller quantity. And we're not counting on it this year because right now, the spreads are not such that between all the transportation and the sharing of the upside with oil traders, etc., look particularly attractive, but the option is there, should the situation change.

Yes. So, it's – I mean, it's largely based on current outlook for the year on the commodities, but to the extent that spread were to increase, that would be an upside to the guidance we've given here.

Great. And then last question for me. In terms of the asset sale process, to the extent some of these deals don't happen or get delayed, what tools do you have to alter your financing plan in light of looks like a choppy M&A market?

Well, first, we have many assets that we can sell, and it's not only sell-out, sell-down. So, we have, I think, a lot of levers there. And we don't like to talk a lot about any specific asset until we have a deal done. It doesn't help us, but we always also sell-down, for example, some of our renewables because that increases our returns by selling down a portion of it while we continue to operate them. So, if you have movements in time that a specific asset sale gets delayed and you're not ready to do another one, that's where other kinds of financings come in, and we'll do the one that makes the most sense. But again, as I said before, maintaining our credit metrics and our investment-grade is a red line in the sand.

Great. Thank you.

Our final question is a follow-up question from Angie Storozynski from Seaport. Your line is now open. Please go ahead.

Thank you. Just one thing. So, the 600 megawatts that might slip into 2024, that's the growth number, right? What would it be adjusted by ownership?

There’s two things. I mean, we normally sell-down after the commissioning.

Yes. I mean, so we do have our partnership with Alberta Investment Management. And so, I would say, for the most part, it's about 75% AES is that number. And the – up to $0.10 that I mentioned, Angie, is AES's share. So, that's not the full number.

Okay. That’s all I need. Thank you.

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.

Ladies and gentlemen, this concludes today's call. Have a great day ahead. You may now disconnect.