Good morning, everyone, and welcome to today's conference call for the AES Corporation Second Quarter Financial Review. My name is Ellen, and I will be coordinating the call today. At the end of the presentation, there will be a chance to ask questions. It is now my pleasure to hand the call over to Susan Harcourt, Vice President of Investor Relations. Susan, please proceed when you are ready.

Thank you, operator. Good morning, and welcome to our second quarter 2023 financial review call. Our press release, presentation, and related financial information are available on our website at aes.com. Today, we will be making forward-looking statements. There are many factors that may cause future results to differ materially from these statements, which are discussed in our most recent 10-K and 10-Q filed with the SEC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andres Gluski, our President and Chief Executive Officer; Steve Coughlin, our Chief Financial Officer; and other senior members of our management team. With that, I will turn the call over to Andres.

Good morning, everyone, and thank you for joining our second quarter 2023 financial review call. Today, I will discuss our second quarter results as well as the excellent progress we're making towards our financial and strategic objectives. Steve Coughlin, our CFO, will give some more detail on our financial performance and outlook. For the second quarter, adjusted EBITDA with tax attributes was $607 million, and adjusted earnings per share was $0.21. Results for the quarter as well as for the first half of the year are very much in line with our expectations. Thus, we're reaffirming our 2023 guidance for all metrics and our targeted annualized growth rate through 2027. As we noted earlier this year, approximately 75% of our 2023 earnings will come in the second half of the year. Now for an update on our strategic priorities. At the core of our strategy is a focus on, first, new renewables with the target to triple our installed capacity by 2027. Second, growth at our U.S. utilities, where we expect to increase the rate base by more than 10% per year through 2027. And third, the transformation of our portfolio as we exit coal by the end of 2025 and invest in the new technologies that will define our industry for years to come. Today, I will provide an update on how we are executing across each of these focus areas, beginning with our renewables on Slide 4. We continue to see significant inbound interest from key customers wanting to do large U.S.-based renewable projects with us. We believe this reflects both our reputation for consistently delivering on time as well as our best-in-class ability to tailor projects to the specific needs of our customers. Year-to-date, we have now signed 2.2 gigawatts of new PPAs, including 2.1 gigawatts since our Investor Day in May. These numbers do not include 1 gigawatt from Belfield second phase or 1.4 gigawatts from our Green Hydrogen Project with Air Products in Texas, both of which could be signed before the year's end. I feel good about the likelihood that we will sign 5 to 6 gigawatts of new PPAs this year. We continue to be globally the number one seller of renewable energy to corporate customers. We also had a leading position in the U.S., providing renewable energy to data centers, which are seeing explosive growth in part as a result of the generative AI revolution. Turning to Slide 5. Another area of recent success is how we have been working with technology customers to complete projects initiated by other developers. Our corporate customers want us to take on these projects because they know we will deliver them on time and can also restructure the original PPAs to provide customized solutions. Two great recent examples of this are the 185-megawatt Delta Wind project in Mississippi, which has a signed PPA with Amazon, and the 2-gigawatt Belfield project in California, 1 gigawatt of which has a signed PPA with a large technology company that is a repeat customer. Both of these projects demonstrate the strength of the relationships we have with our customers. For us, completing other developers' projects is especially attractive because we can get similar returns to greenfield projects while preserving our current pipeline for future projects. Our 61-gigawatt pipeline represents investments in land, interconnection, and development, which must be replaced once utilized, given growing constraints on new transmission in markets like California and PJM. Having the flexibility to decide when to utilize these resources helps us maximize total returns from our renewables business. Moving on to Slide 6. We now have a backlog of projects with signed long-term contracts of 13.2 gigawatts, which is the largest in AES' history. I would like to reiterate once more that our definition of backlog includes only signed contracts for which we have an obligation to deliver and our customers have an obligation to take a given amount of renewable energy for a given amount of time. The average tenure of the contracts in our backlog is 19 years, and currently, 41% of our 13.2-gigawatt backlog is already under construction, and 74% is slated to come online within the next three years. Turning to Slide 7. Since our Investor Day in May, we have completed a number of landmark projects. In June, we announced the commercial operation of the 238-megawatt Phase 1 of the Chevelon Butte Wind project in Arizona. It is one of the first projects in the country to be placed in service to qualify for the 10% additional energy community tax credit bonus under the Inflation Reduction Act. And once Phase 2 is completed, it will reach 454 megawatts and be the largest wind project in the state. In addition, we completed the Andes 2B solar-plus-storage project in Chile for our copper mining customers. It's 180 megawatts of solar plus 560-megawatt hours of storage will make it the largest battery storage installation in all of Latin America. We were also able to use 5b prefabricated solar panels for a portion of the project, which advances the learning and lowers the cost of future developments. Turning to Slide 8. We are on track to complete the 3.4 gigawatts of new renewable projects we committed to earlier this year, including nearly 800 megawatts we've already brought online. In the U.S., we expect to commission roughly 2.1 gigawatts, which is roughly double the capacity we installed last year. I am very proud of the work our teams have done to ensure that we have had no supply chain or construction delays. All of the necessary equipment has been contracted for our 2023 through 2025 backlog. There remains the potential for completion of up to an additional 600 megawatts this year in the U.S., given the strong performance of our construction program. We see our record of completing projects on time as a key competitive advantage that is highly valued by our customers. We are one of the only major developers that did not abandon or meaningfully delay construction projects over the last 2 years due to supply chain issues. Furthermore, due to our emphasis on long-term planning and strong contractual agreements, we have maintained our project margins despite inflationary pressures and rising interest rates. Now moving to our second priority of utility growth on Slide 9. We remain on track to grow our U.S. pretax contribution at an annualized rate of 17% to 20% through 2027. At AES Ohio, we expect to receive commission approval for our new electric security plan or ESP 4 by the end of August, at which point our new distribution rates would go into immediate effect. As a reminder, ESP 4 includes approval of timely recovery of $500 million in grid modernization over the next three years, carrying a 10% return on equity. This will allow us to accelerate investments to continue to improve the quality of service while maintaining the most competitive rates in Ohio. At AES Indiana, we filed for a new rate case in June, the first rate case since 2018. The proposed new rates are designed to recover inflationary impacts since the last case as well as investments in reliability, resiliency improvements, and system upgrades. We expect commission approval by the middle of next year. Even after this proposed increase, we still expect our residential rates to be among the lowest in the state. At AES Indiana, we continue to advance our low-carbon generation growth plan. We recently filed for approval to build a 200-megawatt or 800-megawatt hour storage facility at the site of the retiring Petersburg coal plant. This project is expected to come online by the end of next year, at which point it will be the largest battery storage project in the Midwest. Now turning to Slide 10 and our third priority of transforming our portfolio by exiting coal generation by the end of 2025. Since our Investor Day in May, we have significantly advanced our decarbonization objective by assuring the retirement of an additional 900 megawatts of coal generation. In June, we retired 415 megawatts of coal as we shut down Unit 2 of the Petersburg plant at AES Indiana. We also announced the retirement of the 276-megawatt Norgener Air Plant in Chile by 2025. Additionally, we received final approval, allowing for the termination of the PPA at our 205-megawatt Warrior Run Plant in Maryland for proceeds of $357 million. Now turning to Slide 11. We have expanded our leadership in the development and application of new technologies in our sector. We see this as another important competitive advantage. A new example is the use of embedded artificial intelligence, including generative AI across our operations. This year, we already expect more than $200 million of our adjusted EBITDA to be enabled by AI through both cost reductions and revenue enhancement. We have incorporated AI and data analytics across our operations, from areas such as wind production forecasting to vegetation management to identification of isolated solar panel failures. As part of this program, we also continue to pioneer and advance the use of robotics to install and maintain solar panels. Through our solar robotics program, we are developing proprietary AI-based computer vision to install a wide variety of solar modules, including the largest and heaviest models. With this technology, we plan to install projects significantly faster and across a wide range of working conditions, including extreme heat. In the coming months, we will be validating this technology for the installation of tens of megawatts and expect to move to use it for full-scale solar projects in 2024. Finally, we're consolidating our lead in advanced green hydrogen projects with committed offtakers. We are currently developing the largest announced green hydrogen project in the U.S. jointly with Air Products in Texas. It features 1.4 gigawatts of inside defense, hourly matched renewables, 200 metric tons of hydrogen per day, and a 30-year take-or-pay contract. It is expected to come online in 2027. Our pipeline of advanced green hydrogen projects is equivalent to more than 6 gigawatts of renewables and 800 metric tons of hydrogen per day. With that, I would like to turn the call over to our CFO, Steve Coughlin.

Thank you, Andres, and good morning, everyone. Today, I will discuss our second quarter results, 2023 parent capital allocation, and 2023 guidance. Turning to our financial results for the quarter, beginning on Slide 13. I'm pleased to share that the second quarter was fully in line with our expectations, keeping us well on track to achieve our full-year guidance. Adjusted EBITDA with tax attributes was $607 million versus $722 million last year, driven primarily by lower margins at AES Andes and higher costs at our renewables SBU due to an accelerated growth plan, but partially offset by new renewables coming online and higher availability at select thermal businesses. Tax attributes earned by our U.S. renewables projects were relatively flat at $38 million in the second quarter of this year, in line with our expectations. Turning to Slide 14. Adjusted EPS was $0.21 versus $0.34 last year. In addition to the drivers of adjusted EBITDA, we saw higher parent interest expense this quarter. As a reminder, our year-to-date EPS is fully in line with the breakdown that we outlined earlier this year, in which we noted that roughly 25% of our earnings would come in the first half of the year and 75% in the second half. I'll cover the performance of our strategic business units or SBUs in more detail over the next four slides, beginning on Slide 15. In the renewables SBU, we continue to execute on our strategic priority to triple our portfolio by 2027. For the second quarter, as expected, we saw higher adjusted EBITDA with tax attributes driven primarily by higher wind generation and new projects coming online, partially offset by higher business development and fixed costs due to our accelerated growth plan. At our utilities SBU, we saw higher adjusted PTC driven by lower maintenance expenses, but partially offset by higher interest expense from new debt. We continue to expect strong utilities earnings for the second half of the year driven by typical second-half demand seasonality and the pending August decision on ESP 4 at AES, Ohio. With this pending decision and the great progress in renewables growth at AES Indiana, we are continuing to pursue our strategic priority to increase the rate base by an average of 10% annually through 2027. Lower adjusted EBITDA at our energy infrastructure SBU primarily reflects lower margins at AES Andes in line with our phase-out of coal, partially offset by higher availability at select thermal units. As we execute our third strategic priority to exit coal and complete the transformation of our portfolio, although not every quarter, we generally expect to see annual year-over-year declines in energy infrastructure as we discussed at Investor Day in May. Finally, at our new energy technologies SBU, higher adjusted EBITDA reflects continued improved profit margins at Fluence. Fluence has shown year-over-year improvement for three straight quarters, and we are very pleased with the strong results they are delivering this year. Now to Slide 19. We are on track to achieve our full-year 2023 adjusted EBITDA guidance range of $2.6 billion to $2.9 billion. Growth in the year to go will be primarily driven by contributions from new businesses, including growth at our U.S. utilities and contributions from new renewables projects coming online. As a reminder, the 3.4 gigawatts of new renewables we expect to add this year represents an increase of over 75% compared to the 1.9 gigawatts we added to our portfolio last year. This amount also represents a doubling of new renewables in the U.S. versus 2022. This growth will be offset by approximately $200 million of LNG sales we've recorded primarily in the third quarter last year, which we do not expect to recur this year. In addition to our adjusted EBITDA, we expect to realize $500 million to $560 million of tax attributes in 2023, bringing our total adjusted EBITDA plus tax attributes to $3.1 billion to $3.5 billion for the year. Turning to Slide 20. We are also reaffirming our full-year 2023 adjusted EPS guidance range of $1.65 to $1.75. As a reminder, we expect our adjusted EPS to be heavily fourth-quarter weighted due to the late-year seasonality of our U.S. renewable project commissioning. Now to our 2023 parent capital allocation plan on Slide 21. Sources reflect approximately $2.4 billion of total discretionary cash, including $1 billion of parent free cash flow, $400 million to $600 million of asset sales, and a $900 million parent debt issuance we completed in Q2. For more information on our debt issuances at the parent company and our subsidiaries, please refer to the appendix of the presentation. On the right-hand side, you can see our planned use of capital remains largely in line with guidance, with higher parent investment reflecting our recent acquisition of the 2-gigawatt Belfield project in the U.S. At our Investor Day in May, we outlined our capital allocation plan through 2027, including asset sales, along with debt and potential future equity issuances. We appreciate all of the feedback we've received, and I want to take a moment to clarify that we will only raise and invest capital in a way that's value accretive to our shareholders. Any potential future equity issuances would have to yield accretive value to shareholders for us to pursue equity as a source of capital. We are also committed to improving our credit profile over time and further bolstering our investment grade rating. We have a number of other levers to pull to support our growth, such as increased capital recycling through asset sales and sell-downs. Given our strong asset sales track record and recent success, it is possible that any future equity issuances could be materially lower than the five-year figure we previously shared. As always, our Investor Relations team is happy to take additional feedback and to follow up on additional questions or data requests. In summary, we're continuing to make progress on transforming AES' portfolio while delivering strong growth in adjusted EBITDA, earnings, and parent free cash flow. Our businesses are executing successfully and delivering on their commitments. We will continue to allocate our capital towards our high-growth renewables and utilities to maximize shareholder value. With that, I'll turn the call back over to Andres.

Thank you, Steve. In summary, we're reaffirming our 2023 guidance for all metrics and our targeted annualized growth rates through 2027. We continue to make substantial progress on our strategic priorities, including tripling our installed renewables capacity by 2027, increasing the rate base at our U.S. utilities by more than 10% per year through 2027 and transforming our portfolio by exiting coal by the end of 2025, while investing in new technologies. We are delivering on all the commitments we made on our Q4 2022 earnings call and at our Investor Day presentation. With that, I would like to open up the call for questions.

We will take our first question from Durgesh Chopra with Evercore ISI. Durgesh, your line is open. Please proceed.

Andres, if I heard you correctly, you are targeting 5 to 6 gigawatts of new PPAs first. Can you confirm if that is accurate? This seems higher than what you may have secured in previous years. What is driving that higher range?

Sure, Durgesh. Good to talk to you. Look, we signed 5.2 gigawatts of new PPAs last year. So what we're seeing this year is we already have 2.2 signed. We have visibility into just 2 projects, which would be another about 2.4, right? Which would put us 4.4. And of course, we have other projects in the pipeline. So we're not really setting out an official target, but I'm saying that we believe that we should be similar to last year. And we do have a couple of what I call these whales, the 1 gigawatt plus targets, but we feel very good because we see a lot of demand for our products. We have people coming to us with products. So it's really looking at how do we best allocate our money where we get the highest returns and best allocate our teams.

And then maybe when could we get clarity on the potential 600 megawatts in terms of timing. Is that really sort of a Q3 call event when we would know more? How should we think about that? I'm just thinking about the projects that pushed into 2024, yes.

We are very positive about our construction program. This year, our main challenge was to double our construction efforts in the U.S., and we feel confident about our progress. However, many of these projects are expected to be completed later in the year, so we'll have a clearer understanding during the Q3 call of our status and whether we will initiate more projects this year. Overall, we are satisfied with our supply chain and construction teams, who have risen to the challenge, and I am very proud of their efforts.

And then just one last one for me. Steve, you mentioned that the equity needs could be materially reduced. It's nice to hear that in your prepared remarks. Maybe just can you give us more color when could we get an update on timing? Where are you thinking just the current equity needs, when in the plan are those scheduled to hit? And just when could we get an update?

Yes. As I mentioned earlier, this situation involves several factors. We are making significant progress with our asset sale program, and the $3 billion we referenced at Investor Day is much less than the total available opportunities. I want to emphasize that we will only consider issuing equity in the future, potentially a long time from now, and only when it can enhance shareholder value. Additionally, we have yet to explore other resources we plan to utilize, such as our asset recycling program. Our experiences with Warrior Run and the successful renewable sell-downs, along with divesting more coal assets, indicate that there is considerable potential in our asset sale projections. Right now, this matter is not time-sensitive, and our share price would need to be significantly higher than it is currently for us to proceed, ensuring it benefits shareholders on a per-share basis.

Durgesh, I guess another point I'd like to make is that we've been very effective at bringing in partners to fund our projects. So that's obviously another lever that we have. So we laid out what could be a possible path. We were very conservative on the numbers. But if we don't feel that we want to, at some point in the future, issue equity, we can always invite partners into our project. Of course, we're giving them part of the upside as well.

Our next question comes from David Arcaro from Morgan Stanley. David, your line is open. Please go ahead.

I was curious about your latest thoughts on the timing of the hydrogen PTC in relation to treasury guidance and the rules regarding matching and additionality. Additionally, what is the current status of your pipeline and discussions with potential partners in this area of the business?

Well, the final rules haven't been released yet. I want to emphasize that our Felix project in Texas meets the strictest criteria. It is additional, hourly matched, and regional, resulting in the lowest technically feasible carbon footprint in the U.S. Our project is not dependent on the outcome of the rules. However, I believe additionality is essential, and we need to transition to early matching to ensure that green hydrogen projects can be considered tradable goods, similar to the rules in Europe. Regionality is also important to avoid adding congestion. Our aim is for the new rules to help us create a market while lowering our total carbon footprint, rather than just shifting renewable energy from the grid to produce green hydrogen. I expect the rules to reflect some of these considerations. Regardless, I want to assure you that our projects are robust, with committed off-takers, which is crucial as the green hydrogen market develops. It's important to have not only an excellent project with a very low carbon footprint, benefiting from the IRA, but also to have a committed off-taker.

And then I was curious if you could speak to the transmission challenges just related to transformation interconnection in the renewable industry. You alluded to it in your commentary, but I was wondering if you could speak to what your kind of current pipeline of maybe transmission positions and also with regard to like early stage development, land positions, things like that. How soon could a transmission constraint potentially impact your business? And how are you positioned now to kind of avoid that in the foreseeable future?

Transmission constraints are already impacting the market. We took proactive steps three years ago to secure interconnection filings in key areas like PJM and CAISO, which puts us in a strong position. The industry is evolving, and we need to clarify what we mean by pipeline. For us, pipeline includes projects for which we have land rights, interconnection rights, and viable prospects. Projects vary in their stages of readiness, with some being more advanced than others. I've seen that many developers refer to prospects as part of their pipeline, but we need a consistent definition, similar to how the oil sector categorizes reserves. Securing a pipeline requires investment and funding. Recent changes in interconnection processes may increase costs, particularly from excessive applications for interconnections. Steve can provide more details on how this aspect is developing, which is ultimately beneficial for us. We don’t anticipate short-term negative effects, and we believe our strict criteria for defining pipeline will be advantageous. We aim to maximize our conversion rate, but it's also important to note that when clients approach us for advanced development projects, it’s ideal because it helps us preserve our pipeline, minimizes risks, and allows for quicker project completion to meet client needs.

Yes. And I would just add to that, look, I mean, we're very pleased with the final rules coming out of the third quarter 2023. But although, as Andres said, we've this has been our strategy to lead renewables development for many years. So we put ourselves in an advantaged position, I think, many years ago getting into these queues. Nonetheless, it is important for the industry overall for these queues to be moved along faster in the process to be more efficient. So having the higher financial thresholds to get into the queues and to stay in the queue, having to demonstrate project maturity in terms of permits, and financing behind them, having cluster studies so that this isn't just a one by one review process. And then having the penalties and the teeth behind the deadlines that have to be met to do the studies is also important. So there's a number of angles at which this issue is being approached through the order. The order is due to be published, I think, very soon and will go into effect 60 days later. I think it's a great thing for the industry. We've already felt great about our position. But of course, over the longer term to have these queues cleaned up and moving faster is very important, and I think we'll further accelerate growth throughout the rest of the decade.

And I say, look, we're also taking a technological look at how we can improve transmission for our projects. So this is like using the grid stack to be able to baseload transmission lines, which were really peakers. This means dynamic line rating. This means using our prefab solar, which takes about half the space to be able to put higher loads where we have a good interconnection. And you also noticed that we're putting large battery projects where we have interconnections from our decommissioned coal plants. So we're looking at this problem rather holistically. And again, I think we're in a very good position to take advantage of what's going to be an increasingly congested grid.

Our next question comes from Richard Sunderland from JPMorgan. Richard, your line is open. Please proceed.

Circling back to the data center commentary from scripts. Curious how much of a near-term change in C&I demand you're seeing from this subsector specifically? And any indications of upside just on that ramp over the next 1 to 2 years relative to what you were seeing maybe 6 months or a year ago?

I would say yes. There are some definitions that they are waiting for in various markets regarding rules on locating data centers. However, we are definitely seeing increased interest and rising demand, and we are the largest provider to U.S. data centers. We believe we can uniquely offer data centers the same quality of service in certain international markets such as Mexico, Chile, and Brazil, which gives us another advantage. So yes, we are observing increased demand from that sector.

And then just wanted to parse the kind of backlog pipeline conversation a little bit more finally for the hydrogen. It sounds like the 1.4 gigawatts for Texas could come in this year. Could you just speak a little bit more to your confidence level there for '23 specifically, and what you're focused on there? And then thinking about the balance of the hydrogen opportunities, when could those come in over the next few years?

I believe we are leading in real green hydrogen projects. In the U.S., we have secured offtakers for our project in Texas and have several other initiatives, including two hubs in Los Angeles and Houston. I expect to sign the first project this year, with operations starting in 2027, although this is outside our guidance range. Future projects will likely follow in 2027 and 2028. We are experiencing strong demand and are viewed as a preferred partner by many. Additionally, we have promising projects, such as one in Chile to green the mining sector and a potential ammonia export project in Northeast Brazil. I'm confident that we have the most advanced projects with committed offtakers and anticipate achieving our targets. The timing of these projects coming online depends on having the necessary equipment. In the short term, green hydrogen can be substituted in thermal processes for various petrochemical and steel plants. We need to monitor the market's development, but I believe we are well positioned for this exciting opportunity.

And then just one final one for me. The Belfield project, you've been very clear in a lot of the messaging around how that came together. I'm just curious in terms of considerations around Phase 2 versus Phase 1, just Phase 1 your return thresholds on a standalone basis. How do you think about the progress to signing Phase 2? Anything you can offer there would be helpful.

I think we're well advanced on Phase 2 is what I'm willing to say. It would be a similar project to Phase 1. So that is the largest solar plus storage project in the U.S. in California. So it's a very unique offering that we can bring together.

Our next question comes from Angie Storozynski with Seaport. Angie, your line is open. Please go ahead.

So I wanted to start with some high-profile management departures we've seen since the Analyst Day, basically from your core businesses, right, the U.S. utilities and U.S. renewables. I mean, you might be just victims of your own success in a sense, but just how you can reassure us that there's no change in the execution of your growth plans, especially in these two businesses and the demand that you have to fill those vacancies?

Thank you for your question, Angie. You have accurately captured the situation. This is essentially a testament to the strength of our team. We have an outstanding management team in the market, which naturally leads to offers being made. If individuals choose to pursue private equity opportunities or a long-term IPO, that is their choice. However, this does not impact our business at all. In fact, the best evidence of our continued momentum is that following the departure in clean energy, we have signed more Power Purchase Agreements. We are performing exceptionally well, and I do not foresee any impact on our business. I anticipate the same for U.S. utilities; there will be no effect. This situation actually highlights our robust team and depth of talent, which we will continue to develop and promote. Reflecting on where AES stood in 2012, our team wasn't as attractive back then, which explains why there weren't efforts to recruit from it. I feel very confident about our current situation, and it does not change our strategic plans. The teams remain highly motivated to execute the strategies we have established.

Moving on, you mentioned your backlog of renewable power projects and the potential monetization of assets in equity. Regarding the backlog, we've heard about public renewable power developers showing third-party projects in their backlog where they lack exclusivity. This is just anecdotal, but I'm curious if you've encountered similar situations and if any of this applies to you.

I want to be very clear that we have no such projects in our backlog. I think some companies may not be transparent about this, and I wouldn’t advise anyone to do that. In our case, everything in our backlog is a commitment to deliver projects by a certain date and for a predetermined duration, and our clients are obligated to use that energy during that time. This is a binding agreement for both parties. Currently, 43% of our backlog is in development, and we have ordered all necessary equipment for our 2023 to 2025 projects, with about three-quarters expected to be operational by 2025. I want to emphasize that it’s a valid question, and I can confidently say we would never engage in such practices.

And then on the monetization of assets. So I understand that there is a very big difference between the assets that recently transacted and the ones that you are developing, it's only because of the duration of the PPAs, so basically the duration of the cash flows. But on the flip side, right, you have higher discount rates for the DCF value of those cash flows. So I'm just thinking if you were to monetize some of these assets, again, I guess it all depends on where the stock is. But again, how would that, from your perspective, demonstrate the value of the portfolio that you currently have?

Yes, Angie, this is Steve. We have been selling our renewable projects after they come online, packaging them into a portfolio. We have observed a slight increase in return requirements, but it's within the range we anticipated in our plan, as these are very low-risk assets. They are essentially solar coupons, with no fuel costs and minimal maintenance, making them quite predictable. The demand for these assets remains strong, so we don't foresee any changes to our selling strategy based on current market rates. Does that answer your question?

I think it's important to note that we are dealing with high-quality, investment-grade off-takers. We are selling a premium product in the market. Despite discussions about inflation and rising interest rates, we have not observed any decline in our margins. We are not experiencing any pressure on the profitability of our investments in these projects.

Yes. In addition to what Andreas mentioned, with the new project, we have the energy community adder for it. Furthermore, we expect all of our wind projects going forward to qualify for the domestic adder as well, which provides significant offsets to our financing costs.

Our next question comes from Julien Dumoulin-Smith with Bank of America. Julien, your line is open. Please go ahead.

I know there has been a lot of discussion already, but I would like to follow up on some details regarding year-over-year comparisons as we move into the second half of the year. I noticed that your slides indicate a $0.24 positive net impact from renewables in the latter half of the year and that last year, LNG contributed about $0.30 in that same timeframe. This suggests a significant increase year-over-year in renewables. Could you elaborate on the assumptions you have regarding renewables, particularly in the second half of the year, to help achieve your guidance? Additionally, at the beginning of the year, we discussed renewables contributing around $0.27 for the entire year, which implies that renewables are expected to contribute more than previously anticipated. I’m interested in what that might indicate for future years as well. Please feel free to respond.

So yes, this is Steve. The $0.30 figure doesn’t seem accurate; it’s actually closer to $0.20, which reflects the year-over-year changes in LNG that we need to offset. Additionally, we are significantly increasing our renewable commissioning this year. Last year, it was around 1 gigawatt, and now it’s 2.1 gigawatts, mostly coming in the second half of the year. In the first half, we are primarily incurring costs in renewables. The EBITDA has remained relatively flat during the first half. However, we expect a substantial increase in the renewable figures in the second half, which is why we project 75% of our earnings will come in that period. This is a major factor. Another contributor is the peak utility demand in Ohio and Indiana occurring in Q3. In Southland, we also face peak cooling demand in the third quarter. Moreover, in Latin America, hydro volumes typically rise significantly as we transition out of the wet season into summer and winter and during the snowmelt in the fall. The main drivers are the clean energy from Southland, the utilities, and increased hydro output in Latin America during the second half. However, the LNG offset is mainly around $0.20, primarily impacting the third quarter.

Is there a use on that? Sorry, please continue.

I was just saying we're executing exactly what we laid out at the beginning of the year. So there's been no change. I want to make that clear.

Yes, I think we're right at 25% on the EPS year-to-date. What we're experiencing is a year-over-year decline in the quarter, primarily due to coal retirements in Chile. As we've blended green energy and still have some coal, the margins have decreased, which we anticipated. We're right on track. Additionally, as Andres mentioned, there's potential upside. We feel optimistic about our progress with the construction program, and there's still potential for the 600 megawatts.

But the point is the plan for $0.27 of renewables contribution in '23 unchanged from the start of the year still.

Yes. Let us get back to you on the exact number because I don't have that math in front of me, but the renewables contribution is looking at least on track, is what I would say.

If I may shift the discussion slightly to follow up on some previous questions, could you elaborate on the dynamics of asset sales versus equity? What additional opportunities do you see for monetization as you consider reducing your focus on equity? It seems that the main approach you mentioned, Andres, involves selling down your interest in the new renewables even further. Is that an accurate interpretation of the alternative strategy compared to corporate equity? Additionally, to clarify your earlier statement, at the current levels, you would definitely steer away from the equity levels you referenced before?

On the first point, it's not accurate. The characterization is not correct. We have partnerships across all our businesses, so we don't necessarily have to rely solely on new projects. We can bring in partners; money is flexible. If we monetize a different business, we will have more funds available for renewables. As we have in the past, we can choose to optimize the return on invested capital. I believe we are managing our exit from coal effectively. The Warrior Run monetization has likely exceeded expectations. We continue to manage that situation. We never promised one definitive outcome; as Steve mentioned, we presented a five-year plan that included a conservative estimate for asset sales and a potential range for equity issuance, which somewhat balance each other out. If we perform better with asset sales, we will require less equity and will benefit from successful partnerships. At this point, we do not feel comfortable issuing equity. However, our presentation clearly shows there is significant demand for our initiatives, presenting a unique market opportunity. We aim to maximize the value for our shareholders from that opportunity. If we believe equity is not accurately valued, we will need to pursue different avenues. This should not be surprising; we've managed to finance significant changes without issuing equity, achieved by selling down assets and collaborating with partners. So, we will continue to leverage whatever options generate the most value for our shareholders.

So your point ultimately is not committing to selling down partners per se, a variety of different sources here incrementally just not issuing the equity at current levels. And if I can also clarify this process underway. I know that it was listed in the queue here as well. Is that still status quo in a way?

No, there is no specific process for Maritza at this point. We are still evaluating different pathways for Maritza.

Our next question comes from Ryan Levine from Citi. Ryan, your line is now open. Please go ahead.

A couple of specific follow-on questions. Is your Fluence take core to your portfolio? And I guess secondly, on the financing side, are you still open to considering the convert market to help offset equity issuance?

So this is Steve. So yes, Fluence is part of the portfolio. We own roughly 1/3, 34% of Fluence. It is not consolidated, but it does come in through equity method. And we do, in our adjusted EBITDA definition include an adjustment to include Fluence EBITDA. So that does show up and it's in our new energy technologies SBU influence margin.

The question is that core, is that core?

Is it core to our business?

Core.

I would say that since it's an outside business, I don't consider it strictly core or noncore. Leading in energy storage has been a crucial strategy for us in terms of development and technology, and in enhancing the use of storage to create innovative solutions like 24/7 carbon-free energy. We have engaged in significant co-innovation and co-development with Fluence in that area. Therefore, storage is definitely central to our strategy. However, as Andres has often mentioned, these are independent technology businesses. They are not permanent fixtures for us, and we continuously seek new opportunities. In the future, we may consider monetizing part of our positions, but that's not something we're planning to do soon. We recognize substantial value upside, and we are pleased with the value that the new management team has already generated. There's still much potential, and we continue to pursue partnerships for new solutions. Thus, it is core from that perspective. So no, nothing that we're considering at this time. We completed a $900 million debt deal just in the second quarter, and there are no specific conversions being contemplated right now.

Well, in Puerto Rico, we're greening the island's energy grid. So we do have renewal projects we're bringing in batteries as well. And it's our plan to phase out coal by 2025. So we're assisting the island and its energy transition. And I think we've been very clear what our objectives are.

Our final question comes from Gregg Orrill from UBS. Gregg, your line is now open. Please go ahead.

Yes. Probably quick. On AES Ohio, is the DPO rate case, how does that timing compare with what you were assuming in guidance or any other differences with how that's proceeding versus the '23 guidance?

Yes. Gregg, it's right on track with what we assumed in our guidance. So the decision has been put on the agenda for next week, August 9, that was just published, I believe, yesterday. So right on track in terms of when we assume the decision to be made. And we still feel really good about where that is likely to come out. As a reminder, once the decision is made, is to put in place, then the new rates that were decided upon last year immediately go into effect. And as we've laid out, the riders would go into effect and then the frequent quarterly recovery on our distribution investments going forward would start to be put in place. And so this is a business really pivoting to a very different phase from where we've been deleveraging and setting that business up for a more normalized structure. This is an important pivot point for Ohio to really pivot to growth, and there's a lot of room for growth as there are the lowest rates in the state there in all customer classes. And even with the ESP 4, the new rates, we expect it to continue to be the lowest rates in the state for the foreseeable future. And we have, as Andres noted, 10%-plus rate base growth expected going forward. So we're very excited about this and look forward to the decision next week.

Yes. And I'm also very excited about that Dayton is finally getting incoming investment. So you have a new Honda EV plant and a battery plant coming into our service area. So you're starting to see an economic recovery. Dayton had sort of been not participating in the expansion that we had seen in Eastern Ohio. So it's a very exciting time, and we're very happy that we could invest and continue to improve the quality of service and continue to attract new investments into the Dayton area. So it's not only a rate base story, I think there's an economic recovery story happening in Dayton for the first time in decades. So it's a very exciting time to be in Dayton.

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.

This concludes today's conference for everybody. Thank you very much for joining. You may now disconnect your lines. Have a great rest of your day.