Good morning. Thank you for joining today's AES Corporation Third Quarter 2024 Financial Review Call. My name is Megan, and I will be your moderator for this session. All lines will be muted during the presentation, and there will be a chance for questions and answers at the end. I would now like to hand the call over to Susan Harcourt, Vice President of Investor Relations at AES Corporation. Susan, you may begin.

Thank you, operator. Good morning, and welcome to our third quarter 2024 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 disclosed in our most recent 10-K and 10-Q filed with the SEC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andres Gluski, our President and Chief Executive Officer; Steve Coughlin, our Chief Financial Officer; and other senior members of our management team. With that, I will turn the call over to Andres.

Good morning, everyone, and thank you for joining our third quarter 2024 financial review call. We are pleased with our performance this year. And today, I will discuss our third quarter results, a robust growth we are seeing at our renewables and U.S. utility businesses, and our progress towards our asset sales target. Beginning on Slide 3 with our third quarter results, which were generally in line with our expectations. Adjusted EBITDA with tax attributes was about 1.2 billion, adjusted EBITDA was 692 million and adjusted EPS was $0.71. We're on track to meet our 2024 financial objectives, including our expectation to be in the top half of our ranges for adjusted EBITDA with tax attributes and adjusted EPS. At the same time, we now expect adjusted EBITDA to be towards the low end of the guidance range for the year, primarily due to the one-time impact of extreme weather in Colombia and the lower margins in the Energy Infrastructure SBU. We are reaffirming our expected growth rate through 2027. Steve Coughlin, our CFO, will provide more detail on our financial performance and outlook. I'm also very pleased to report that since our last call in August, we have signed or been awarded 2.2 gigawatts of new contracts. This includes both long-term renewable PPAs and new data center load growth at our U.S. utilities. Moving to our Renewables business on Slide 4. Since our Q2 financial review call, we have added 1.3 gigawatts of new PPAs to our backlog, bringing our year-to-date total to 3.5 gigawatts, more than 70% of which is with corporate customers. As a reminder, last year, we set a target of signing 14 to 17 gigawatts of new PPAs from 2023 to 2025. And with 9.1 gigawatts signed or awarded since the beginning of last year, we're currently well on track to meet this objective. Since setting that goal, we also materially increased our project return targets and we are focused on prioritizing the most profitable PPAs. Moving to Slide 5 and our construction progress. Since our second quarter call in August, we have completed construction of an additional 1.2 gigawatts of new projects, bringing our year-to-date total to 2.8 gigawatts, which represents nearly 80% of the 3.6 gigawatts we expect to complete this year. On-time execution is one of our competitive advantages, and we believe we have the best supply chain management in the industry. In the U.S., we have 100% of our solar panels on site for those projects coming online this year and 84% in country for next year. For 2026, we have 100% of our solar panels either in country or contracted to be domestically manufactured, providing protection against potential changes in tariff policy. We have also been a first mover in securing domestically manufactured battery modules and cells. We expect our first battery energy storage project with domestic content to come online in the first half of 2026. Additionally, we have established a robust supply chain for wind through our strategic suppliers with domestic manufacturing. Regarding long lead time equipment, such as transformers and high-voltage breakers, we have secured all of the supply for our backlog through 2027. Turning to Slide 6. We are very well positioned as a leading provider of renewable energy to data center companies, particularly in the U.S. and to large mining companies outside the U.S. These customers want to work with AES due to our track record of providing customized solutions that best serve their specific needs and delivering our projects on time and on budget. With the U.S. elections only a few days away, I have great confidence in the resilience of our business plan, regardless of the outcomes of the presidential and congressional elections. While we do not believe the elimination of the investment tax credit or production tax credit is likely, even in an extreme scenario, we're uniquely well positioned due to the following. First, regardless of federal policies, our corporate customers have a massive need for new power that can only be met by renewables over the next decade. McKinsey estimates that in the U.S. data centers alone could require an additional 450 terawatt hours through the end of the decade, which is equivalent to more than the annual electricity consumption of France. With these market dynamics, we will continue to sign high-return renewables PPAs with our core customers. Second, should there be any changes to U.S. tariff policy, we have a resilient supply chain, with a large majority of our project components manufactured domestically by 2026. Finally, our strategy of procuring our equipment at the time of the PPA signing provides clear Safe Harboring protection from potential changes in policy. Now turning to Slide 7. Over the last 12 months, we have embarked on the most ambitious investment program in the history of our U.S. utilities, which will improve reliability and quality of service for our customers, while maintaining some of the lowest rates in both states. AES Indiana and AES Ohio are now two of the fastest-growing U.S. utilities, with projected double-digit rate base growth through 2027 based on necessary investments for our customers. As you may recall, in the third quarter of last year, we received commission approval for a new regulatory structure for AES Ohio, providing for timely recovery of the majority of these investments. Similarly, earlier last year, we received commission approval for new rates at AES Indiana, our first rate case in seven years. We are starting to see the benefits from the $1.2 billion we have invested in both utilities so far this year, representing a year-over-year increase in investment of 60%. Excluding the one-time settlement benefit recognized in 2023, year-to-date EBITDA is up 25%. Turning to Slide 8. We're also seeing additional investment opportunities from data center growth in our service areas above and beyond our existing rate base projections. Our utilities have many natural advantages that are attractive to large technology companies, such as proximity to fiber networks and the presence of ample land and water. We have worked to proactively identify sites that are well positioned to support new data centers, capitalizing on our deep relationships with technology companies. At AES Indiana, we expect to have specific data center deals to announce in the coming months, as we've been in active negotiations with several parties. We recently launched an RFP for 3 gigawatts of new generation to support accelerating demand growth. From a regulatory perspective, we will use the results of this RFP to help inform our IRP submission next year. At AES Ohio, we have now signed agreements for new data center load growth of 2.1 gigawatts, including an incremental 900 megawatts, on top of the 1.2 gigawatts we already announced on our last call. On our fourth quarter call in February, we will provide a comprehensive update on how these agreements impact our long-term investment plan and rate-based growth. Today, we can indicate that just what we've signed to date provides a nearly 30% increase in investment through the end of the decade over our current plan. Turning to Slide 9. In September, we announced the plan to sell down 30% of AES Ohio to CDPQ, our longtime partner in AES Indiana. This transaction builds upon our strong relationship with CDPQ and allows us for common ownership across our U.S. utilities. This partnership will support growth at AES Ohio, with CDPQ as a funding partner for increasing investments to support reliability and economic development. Finally, as you may have seen in our release, we are pleased to report that we have now closed the sale of our equity interest in AES Brazil. We are proud of the work our people have done in Brazil to expand beyond the 2.7 gigawatt hydro portfolio by adding 2.5 gigawatts of operating wind and solar, creating one of the largest renewable businesses in the country. With these two transactions, we have now signed or closed agreements for more than three-quarters of our 3.5 billion asset sale proceeds target through 2027. We have also further simplified our portfolio and eliminated Brazilian weather, interest rate, and currency risks. With that, I would now like to turn the call over to our CFO, Steve Coughlin.

Thank you, Andres, and good morning, everyone. Today, I will discuss our third quarter results and our 2024 guidance and parent capital allocation. Turning to Slide 11. Adjusted EBITDA with tax attributes was approximately 1.2 billion in the third quarter versus 1 billion a year ago. Although we realized 458 million of additional tax value year-over-year, renewables EBITDA was down 68 million, driven mostly by breaking drought conditions in South America. In addition, our energy infrastructure SBU was down 221 million largely due to expected items, which I'll cover in more detail on a later slide. Turning to Slide 12. Adjusted EPS for the quarter was $0.71 versus $0.60 last year. Drivers were similar to those of adjusted EBITDA with tax attributes, but partially offset by higher parent interest due to growth investments as well as a higher adjusted tax rate. I'll cover the performance of our SBUs, or strategic business units, on the next four slides. Beginning with our Renewables SBU on Slide 13. Higher EBITDA with tax attributes was driven primarily by significant growth from new projects in the U.S., where we've added 3.3 gigawatts since Q3 2023, but was partially offset by significant declines at our Colombia and Brazil businesses. This year, we've experienced unprecedented weather volatility and a record-breaking drought in South America, driven by El Nino conditions. In June, a historic flooding event took out our 1 gigawatt Chivor facility in Colombia for nearly 2 months, followed by an extreme drought across the entire country. Also, you may recall that the third quarter of 2023 was extremely positive as we had better hydrology at our Chivor facility than the rest of the country while spot prices were very high, yielding significant margins. As a result, Colombia is down 92 million versus the third quarter of last year and over 130 million year-to-date versus last year. In Brazil, the record drought and extremely low wind resource this year have also negatively impacted renewables in Q3 and year-to-date. While 2024 has been a difficult year due to the events in South America, we expect our renewables segment will grow significantly in 2025. Emerging La Nina conditions in the Pacific are expected to return the region to much better hydrology. While in the U.S., by the end of this year, we will have brought online a total of nearly 2 gigawatts of new capacity, which will drive a large increase in our Renewable segment EBITDA in 2025. Now turning to Slide 14. Lower adjusted PTC at our Utilities SBU was mostly driven by the prior year recovery of 39 million of purchase power costs at AES Ohio, included as part of the ESP IV settlement, as well as higher interest expense from new borrowings. This was offset by returns on new rate base investment in the U.S. as well as new rates implemented in Indiana in May. Adjusting for the one-time settlement last year, utilities adjusted PTC grew by 18% in the third quarter over prior year. Lower year-over-year Q3 EBITDA at our energy infrastructure SBU was primarily driven by nearly 200 million of expected declines at our Warrior Run Southland legacy businesses and the impact of several sell-downs, all of which were baked into our guidance. At Warrior Run, we recognized revenues from the accelerated monetization of the PPA beginning last year and ending in the second quarter of this year. Our legacy Southland assets benefited from energy margins earned in the prior year, which are no longer an opportunity in 2024 under the new extension monetization structure. In addition to these known drivers, we experienced lower margins at our new Southland combined-cycle asset U.S. due to much milder weather as well as extended outages at our TEG and TEP thermal plants in Mexico. Finally, higher EBITDA at our New Energy Technologies SBU reflects continued high growth and margin increases at Fluence. Now turning to our expectations on Slide 17. We are reaffirming our 2024 adjusted EBITDA with tax attributes guidance of 3.6 billion to 4 billion and adjusted EPS guidance of 1.87 to 1.97 and continue to expect to be in the top half of both ranges, driven in part by the success we've had securing higher tax value on our new projects. Our renewables team expects to capture over 200 million in tax value upside this year, which reduces our growth capital needs. EBITDA from renewables will be favorable in the fourth quarter from revenues earned on our PPAs, although we expect lower tax attributes in the fourth quarter as a result of the more balanced timing of renewable commissionings throughout the year. We also expect further growth in our U.S. utilities in Q4 as we continue to realize returns from our investment program. This will be offset by the negative impact from the prior year monetization of the Warrior Run PPA as well as incremental impact from asset sales, including AES Brazil. Drivers of adjusted EPS will be similar along with higher interest expense from growth capital, but benefiting from a lower adjusted tax rate. As a result of our efforts to spread renewables construction more evenly throughout the year, we've achieved more than 80% of our adjusted EPS guidance year-to-date, providing greater certainty around our 2024 financial objectives. Turning to Slide 18. We are also reaffirming our adjusted EBITDA guidance range of 2.6 billion to 2.9 billion. While I'm pleased with our execution this year on our growth objectives, several large drivers have impacted results, primarily at our legacy businesses, and we now expect to end the year towards the lower end of our guidance range. Milder weather compressed spark spreads in California resulting in lower margins at our South and combined cycle gas plants. The PPA for these assets contains an option that allows us to choose to sell the energy to the market in a given year. We previously chose to execute this option for 2024 and were therefore impacted by declining spark spreads that occurred later in the year. In Mexico, the unplanned outages, which have now been resolved, further impacted our results in the second and third quarter. In Colombia, the combination of the Q2 flood-related outage at Chivor and year-long record drought have negatively impacted us versus our guidance. Finally, inverter failures at several of our solar sites impacted availability versus our plan. These inverters were under warranty and are being remediated by the manufacturers. Despite the confluence of these one-time negative impacts, growth in U.S. renewables remains very strong, and our U.S. utilities have outperformed. We expect to continue this momentum and substantially increase EBITDA at both our renewables and utilities businesses in 2025. Now to our 2024 parent capital allocation plan on Slide 19. Sources reflect approximately $2.7 billion of total discretionary cash, including $1.1 billion of parent free cash flow, $950 million of hybrid debt that we issued in May and $650 million of proceeds from asset sales. Sale proceeds will be slightly lower than expected in 2024 due to timing, but we are well ahead of our $3.5 billion long-term target through 2027. On the right-hand side, you can see our planned use of capital. We will return approximately $500 million to shareholders this year, reflecting the previously announced 4% dividend increase. We also plan to invest $2.2 billion to $2.3 billion in new growth. In summary, we've continued to execute in the year-to-date and are well-positioned for a strong finish to 2024. Our substantial renewables commissioning thus far give us greater line of sight towards achieving our earnings and cash targets, and our funding plan is largely complete. With $1.60 of adjusted EPS year-to-date, we have overachieved on our EPS growth with a clear path to landing at least in the upper half of our guidance range. As we look ahead to 2025, we see strong growth in our Renewables and Utility segments and continued execution of our decarbonization strategy in energy infrastructure. I look forward to providing additional detail around 2025 and beyond on our fourth quarter call. With that, I'll turn the call back over to Andres.

Thank you, Steve. Before opening up the call for Q&A, I would like to summarize the highlights from today's call. We continue to execute well on our strategic priorities, including robust growth at our renewables and U.S. utility businesses. With 9.1 gigawatts of new PPAs signed or awarded in 2023 and year-to-date 2024, we are well on our way towards achieving our goal of 14 gigawatts to 17 gigawatts in 2023 through 2025. Regarding our construction program, we have added 2.8 gigawatts of new projects to our operating portfolio so far this year, and we're seeing the direct financial benefits in our adjusted EPS and adjusted EBITDA with tax attributes results. At our U.S. utilities, we have embarked on the most ambitious investment program in their history, while signing agreements for 2.1 gigawatts of data center load growth, and we expect more in the coming months. We're also executing well on our asset sale and transformation program and we feel good about the remainder of 2024 and our long-term outlook, despite specific one-time weather-related events this year. Finally, I can confidently say that I believe no one is better positioned with large technology customers than AES. Energy market fundamentals and the strong demand we're seeing from our corporate customers give us great confidence in the resilience of our business plan, regardless of the outcomes of the upcoming U.S. elections. Operator, please open up the line for questions.

Our first question will come from Nick Campanella with Barclays.

Good morning, thank you for taking my question. So, I wanted to just ask the comments about supply chain; you seem well positioned through 2026 with panels, etc. But you continue to construct 3.5 gigawatts for this year. You kind of outlined this previous target at the Analyst Day of 14 gigawatts into 2025. So, we're getting closer up to '25 now. I just kind of check in and see how you feel progressing towards that target because it seems like it will be a pretty good step up into '25 here? And is that still attainable?

Yes. Thanks for the question, Nick. I mean we feel very strong about our supply chain management and construction program. We are the only large renewables developer which really hasn't had to abandon any large PPAs over the last 3, 4 years. So, what we've said, we have all the equipment we need this year. We have 84% of what we need for next year already in country. In the next month or so, we should have 100%. So, we feel very good about supply chain. We intend to concentrate on the big items like wind turbines, batteries, and solar panels. But you also have inverters and you have transformers, which are long lead time, and we feel very solid there. In addition, we've really had no problems with the workforce either because we have strategic relationships with EPC contractors so that they can move the crews from one project to the next. So, to answer your question, we feel very good about our construction program. And as you know, in 2023, we geared up 100%. So now we've been able to really smooth out our commissioning throughout the year, and we expect that in 2025 and 2026.

All right. When I think about '25 again, obviously, you had, on a tax attribute basis, some one-timers that's kind of putting you a little lower here. And I sense the notable confidence on the growth into 2025. Can you just kind of quantify for us how much has really just returned to normal versus new EBITDA from renewables contributions? And then when you consider things like Brazil rolling off, do you still expect that renewable segment to grow year-over-year?

Yes. Look, that's a very good question. We aren't giving guidance for 2025 at this time. But you're right, what you really have is mean reversion. You are really coming back to sort of more normal year. 2024 is a year that we've never had before, the sort of combination of extreme floods and extreme droughts in some of our service territories, largely driven by El Nino, coming into La Nina, we expect a return to normal. But you also correctly point out that we're maintaining all of our guidance and our long-term growth rates without Brazil. And so that means that the other sectors are picking up. So, to the extent that I can say we expect next year to be a more normal year and we've absorbed the sale of Brazil by increasing the growth rates, especially in U.S. renewables and U.S. utilities.

Hi, Nick. It's Steve. I would just add. We've added and will add a total of 3 gigawatts of new renewables this year across the portfolio. So in addition to some more normalization, like La Nina coming in South America, the installed base is going to be significantly higher. So that's part of it. Renewables segment will grow significantly. And we also have outside the renewables, we have the utilities growth. So, with a full year of new rates in Indiana and continued rate base growth in Ohio.

That makes sense. Thanks for answering my question and see you soon.

Thank you, Nick. Our next question comes from the line of David Arcaro with Morgan Stanley. David, your line is now open.

Hi. Thanks so much. Good morning. I was wondering if you could elaborate on the outperformance you had in tax credits that you received. You referenced the $200 million higher-than-expected tax credits. Wondering what that stemmed from? And is there an opportunity for any more outperformance from here?

It's been a very good year for us. This area is a core competency and a key differentiator for our company. We have one of the strongest tax and renewables finance teams in the industry. Our goal is to maximize tax value opportunities, which lowers our capital requirements and enhances returns. We've successfully qualified for bonuses in several instances, particularly in brownfield sites or those that allow us to tap into energy community benefits. These include previously agricultural sites that can qualify due to their prior use of different materials. We've conducted extensive research to secure adders where possible. It's also important to note that not all tax credits have the same value. Due to our proven track record, clients are inclined to work with us, which means we often see less of a discount. We've had significant success in monetizing through transfers, which tend to be recognized faster than through tax equity partnerships. I see potential upside in this area moving forward, but we also have to consider the broader portfolio. When we provide guidance for 2025, we will update you on the overall portfolio.

Okay. Got it. That's helpful. Good to see just chipping away at the financing need with that. And then wondering if you could just touch on what renewable returns have been on the incremental projects that you've been signing, I guess, since raising your return expectations earlier in the year, how those return levels have been trending? Has there been continued momentum upwards?

We are experiencing positive returns from our projects, and the market continues to appreciate the value we offer to our customers. Therefore, we remain confident that our newer projects are performing well, aligning towards the higher end of our expectations. We are assured of the figures we have shared.

Okay, got it. Appreciate it. Thanks so much.

Thanks, David.

Thank you, David. Our next question comes from the line of Durgesh Chopra with Evercore ISI. Durgesh, your line is open.

Hi. Thank you. Good morning team thanks for taking my question. Just wanted to start off with the actual portfolio that is going to come online, not from the guidance. But in terms of the 2.8 gigawatts that's coming online this year, should we expect an uptick in that number as we go into 2025, the actual construction and getting projects online?

Yes. So this is Steve. So we'll give that guidance in February. So there's a number of moving pieces here. I would say the largest inflection will be beyond 2025, Durgesh. And so I expect renewables will be up somewhat. But I think based on what our COD schedules look like, the largest increases will come in '26 and '27.

Got it. Okay. That's very helpful. That's just project timing. Okay. I have two other questions. First, on the hydrogen project with APD, there may have been some changes there, with the activist involvement with the company. Just can you update us what your plan is there? How much capital might you have invested to date? And what do we do with those gigawatts coming online? Just anything you can share there, that would be helpful.

Sure. No, I appreciate the question. Look, we have developed a very attractive 1.5 gigawatts of renewables which, as you know, there is a market that there's a shortage of large advanced renewable projects. So we have to see when 45 V comes out and other things, how much of this goes to hydrogen. But in any case, we have a very attractive asset there. Regarding outside of the states, I do see those projects likely going forward with Asian buyers stepping up and as partners in the early part of it. So we don't have a lot of money invested other than development money that we've done. However, I think that this is probably some of the best pipeline development that we've done because it's a particularly attractive asset.

Got it, Andres. That's very helpful. Is this part of the backlog you mentioned? I believe that number is 12 now. Is the 1.5 gig included in the 12?

We only include in our backlog what is signed or awarded at the very final stage. We've never taken any project out of our backlog. We wouldn't include it until we have a signed PPA.

Understood. Okay. Very clear. One final question, sorry for dragging this out. Steve, regarding Moody's basis, earlier this year we discussed a potential methodology change at Moody's. Can you update us on your current position with Moody's and any recent conversations you've had with the credit rating agency?

Certainly, Durgesh. The discussions are ongoing, and I anticipate they will release an update before the end of the year. I see the dialogue as very productive. It’s encouraging to note that our credit quality has indeed enhanced since the initial upgrade a few years ago. The reality is that we have been actively transforming the portfolio by exiting certain markets and carbon-intensive assets, while reallocating capital toward long-duration, U.S. dollar, high creditworthy counterparties with no fuel exposure. This gives us a very appealing profile. The focus of Moody's, as they evaluate AES on a consolidated basis, differs from S&P and Fitch, which assess at the parent recourse level. They are examining the project finance structures and their considerations. Project finance is amortizing, which means that the debt we incur for our projects is paid down over the duration of the contract, avoiding any extended leverage risks. As a result, it’s a low-risk setup, and the debt at the project level is rated investment-grade. However, this structure hasn’t aligned with their established thresholds yet. They are also reviewing the significant amount of construction debt we carry due to our growth, which has not started generating returns yet. They are considering how to take into account the cash flow that will emerge. Additionally, this debt is nonrecourse, and they are contemplating adjustments in that context as well. Overall, I am optimistic about our position and the conversations taking place, and I expect they will share their insights before the year's end.

I would add that if you think of the sort of the big picture overall, we continue to improve our credit profile. So we exited Brazil which was a substantial amount of our FX, certainly a big part of our foreign interest rate exposure and weather-related exposures we learned this year. So as we shut down coal plants or sell coal plants, you're changing 2-year PPAs with fuel risk for really long-term 20-year PPAs with no fuel risk with investment-grade off-takers in the U.S. So I feel very confident that any credit rating agency looking at overall company where we are today versus where they gave us the ratings a year or two ago is a substantially better company.

Got it. Really appreciate that color guys. Thank you.

Thank you, Durgesh.

Thank you, Durgesh. Our next question comes from the line of Julien Dumoulin-Smith with Jefferies. Julien, your line is open.

Hi, good morning team. Thank you guys very much for the time. I appreciate it. Can you guys hear me?

Yes, Julien very well.

Thanks you, Andres. Excellent. Well, actually since we're talking on the credit here, just to kick off on the nuance, just where do you see your metrics getting here and then more specifically, do you anticipate needing to upsize the asset sales or accelerate the asset sale target to kind of true up the balance sheet for any reason here? I get the Moody's methodology is in flux, but as you think about the asset sale piece of this, any observations to make on that front since we were focused on in the second year?

No, certainly. So I mean the credit metrics remain strong at the parent level. And actually, things that we've been doing are quite credit accretive. So some of the largest things we've done here now just closing on Brazil. Brazil, while it was generating a significant amount of EBITDA in the Renewable segment was actually producing very, very little cash. The business is highly levered and so the sale is actually very credit accretive. Similarly, with the Ohio sell-down when that closes next year, we're going to be paying down a tranche debt that's due at the holdco over 400 million. So we see that as also credit accretive and that we do, in fact, expect as a result of the transaction Ohio will be able to start paying dividends at least a year sooner than it otherwise would have. So we really feel good about the trajectory. I would expect at the end of this year, the parent level metrics will be between 22% and 23% which are well above the threshold of 20% that we have. And so yes, no, Julien, I think the asset sale program, we've had a lot of success, targeted 3.5. The universe is, in fact, bigger. So we'll see what makes sense going into the future. But I see us having a lot of runway here and that the credit metric has actually, in fact, been supported by the asset sale program.

I'd like to sort of also say that we've always exceeded our asset sale program targets. And I would also say, quite frankly, I think we have a very good record of selling assets at good value. And what we've always been doing is maximizing the value for our shareholders and not just doing asset sales to hit a certain, let's say, megawatt or generation composition target.

No. Fair enough, guys and thank you for that. Let me pivot real quickly to Palco here. We saw your peers to the north with NIPSCO. NiSource gave a very robust update. You guys are talking about 3 gigawatts of procurement activity. I know you guys already had a team's trajectory articulated at the Analyst Day last year, but I suspect that number is potentially meaningfully higher or potentially extend it out for meaningfully greater duration given A the 3 gigawatts and B the baseline of the rate base at Palco here. If you can speak a little bit to what your expectations on what total portion that you can own and how it impacts your financials here?

The rate case this year was resolved and approved early, resulting in an annual increase of over $70 million. This will have a significant impact year-over-year, as we will have a full year of the new rates next year. Additionally, as mentioned by Andres, we're working on a request for proposals for new generation in the utility, which will be included in the integrated resource plan to be submitted next year. We're discussing a total of 3 gigawatts, which is an increase in data center load across the utilities, in addition to existing agreements. We expect double-digit growth in rate base across the utilities, but we believe it will be much higher than that. More guidance will be provided in 2025, but the utility investment is set to rise, leading to increased returns and a larger rate base. This is also why we decided to reduce our stake in Ohio; even though we are selling 30%, our net investment in the utilities is still increasing. This divestiture is improving our credit, allowing for earlier distributions from the utility, enhancing the credit quality in Ohio, and facilitating a more extensive investment program than we anticipated last year. Our net investment will be even higher despite holding a 70% ownership in both utilities. In Indiana, as it is an integrated utility, we benefit from both the network load and the generation capacity, and we foresee substantial growth in generation.

Right. So even the medium-term rate base growth CAGR, it could potentially be heading higher is what I'm hearing. But actually, you made allusion to one thing here, if I can just clarify. You'll be providing an updated outlook here on the fourth quarter. And I know that there's a lot of different things that are moving around in the plan. So as you guys have done historically, expect that kind of integrated update here on 4Q roll forward from the Analyst Day?

Yes, we will update you on our long-term plans in February.

Wonderful. Excellent, guys. Thank you for the time. Appreciate it.

Thanks Julien.

Thank you, Julien. Our next question comes from the line of Angie Storozynski with Seaport. Angie, your line is open.

Thank you for taking my question. So I just wanted to focus on the renewable power EBITDA. So the one without credits for cash EBITDA, I would call it. So I'm looking at these results. I mean you will be basically flat since 2022. And now it looks like 2025 is going to be also like 620, 630 range. So, I mean I understand that there are one-off items that weighed on this year's EBITDA which is going to be even lower than the number I just mentioned. So I mean there has to be some growth in that number. And I hear you, Steve, that there will be some in '26, '27, but you're making very substantial investments and we're not seeing growth in that cash renewable EBITDA. Now the reason I'm actually asking about it is because if you look at the parent free cash flow, parent distributions, I mean the vast majority of them come from energy infrastructure, but that's a segment that is shrinking. So I will have to rely on cash distributions from renewables very soon in order to hit the free cash flow expectations. So I'm just hoping that we can reconcile this. Thanks.

Yes. First, we are not suggesting that the renewable EBITDA will significantly increase in 2025. We are selling our assets in Brazil, which amounts to 5 gigawatts, making it a bit tricky to compare things directly. We are observing the operating results from our renewable projects are in line with our expectations. There are several factors at play that will become clearer over time. However, I do not believe it is accurate to say we are not seeing results from our investments; they are just evolving. Regarding energy infrastructure, we have a well-balanced portfolio, so it is common for challenges in one area to be balanced out by successes in another. This quarter was unique because many factors that usually do not align happened simultaneously. Typically, if we experience good conditions, we also have more wind. In this case, we had both, but we also faced significant rainfall over a brief period, which damaged 1 gigawatt of hydro capacity. Therefore, I believe these were one-time occurrences, and I feel you may be drawing broader conclusions from this situation. I will hand it over to Steve.

I would like to point out that the only factor contributing to our decline year-over-year is the record drought, especially in Colombia and to some extent, Brazil. These conditions are changing as we transition to La Nina. With Brazil removed from our portfolio, we anticipate that Colombia will return to more typical conditions next year. Additionally, last year's third quarter results in Colombia were extremely high, making this year's year-over-year comparison appear more drastic. However, the reality is that we are seeing significant growth in the U.S., which will more than offset the loss from Brazil in the renewables segment. We expect substantial growth in renewables this year. While we may not currently be on track with our guidance, we anticipate a strong improvement next year and reaffirm our growth rate of 19% to 21% through 2027, primarily driven by the surge in U.S. growth. We have added a total of 3 gigawatts of renewables since Q3 of last year. We will also be transitioning Chile into the renewable segment as we proceed with our exit from coal, which will enhance cash flow from this segment and align our EBITDA with the expected growth rate.

Okay. So let me just push back the latter, meaning that Chile was supposed to be additive to the growth trajectory that you were showing at the Analyst Day. And now that we see the results, like year-over-year changes versus '23 results, you clearly point out that the second half of '23 had some big one-time benefits, which you could not have counted on during your '23 Analyst Day, and yet you came below your expectations, even the low end on renewables EBITDA for '23. So again, I mean, I hear you that there is growth in the U.S. portfolio, which will benefit the EBITDA, but again, I mean, you had some big positives in the second half of '23, which you could not have expected when you were giving guidance on '23 on renewables and you came below expectations on renewables in '23 now. So why should I have conviction that the same is not going to be true in future years?

Well, we feel confident we're going to hit the long-range growth that we talked about. I mean it has to do with reaching critical mass on some of these things. And certainly, we can have one-time weather events. But I think the important thing is what returns are you actually seeing from the projects you're bringing online? What is the value of the PPAs you are signing? And as we move forward, it will be easier to make apples-and-apples comparisons as we have the same portfolio new year.

Yes. The other thing I would say, Angie, is referring to last year, we did end up having more of our commissionings very late in the year, in fact, most in December. So a little later than expected this year. We have substantially changed that trend. And so the renewable commissionings were much more really spread throughout the year. That's why we've already recognized $900 million of tax attributes already. So I think that's another reason that that program has become more mature and spread throughout the year that we're seeing a better result, and that ‘23 was lower.

And just one other question. So I'm looking at your guidance here on the free cash flow for the parent for the year. It seems like you are expecting about $1.5 billion to $1.6 billion in distributions from subsidiary and you are at about 800, 880, I forget. So is this apples-to-apples, meaning that I am basically 50% of distributions, meaning that the fourth quarter will be the big catch-up on distributions?

Yes, that's a typical trend we've observed for a long time. In most instances, the cash is already available, depending on our debt service schedule, which also dictates when we can pay dividends. We have clear visibility on the remaining dividends; it’s just a matter of timing for when they will be released, which can occur twice a year or annually in some cases. I'm very confident about the level of distributions.

Okay. Thank you.

Thank you, Angie.

Our next question comes from the line of Michael Sullivan with Wolfe Research. Michael, your line is now open.

Hi. Good morning.

Good morning, Michael.

I understand that this may have been overlooked during the previous discussion. To be clear, you keep mentioning significant growth in 2025. While we’re not certain what that entails, you indicated a 5% to 7% EBITDA CAGR starting from 2023. When will you incorporate that into your plans?

Yes. We'll provide an update in February. As we continue with the transformation, we have exited Brazil and will exit Vietnam next year. The closure of Warrior Run also contributes to this transition. This impacts the early years, but I believe we will see a turning point beyond next year, particularly as we move towards 2027. Renewables are expected to grow significantly next year, and utilities will recover to the growth levels we've anticipated. The decline in energy infrastructure has been more pronounced at the start, and while the Brazil sale poses a short-term challenge for renewables, we will more than compensate for that next year. Overall, we are optimistic about the growth rate, which will depend on how well we manage the transformation, reflected in the reduction of energy infrastructure. More details will be shared in February, but I am optimistic about both renewables and utilities. We will also discuss options regarding the pace of transformation in February.

Okay. That's very helpful, Steve. And then I had 2 ones just on your resource additions. The first, just in terms of looking at new gas at the utility, do you see that in the RFP? Or is that not until the IRP? And do you have a good handle on how much you could look to be doing in gas? And then on the non-utility side, you all have traditionally been pretty solar-heavy though I think you mentioned wind a few times just in terms of supply chain. But when I look at you and your peers, it doesn't seem like anyone's adding too much wind these days. So just curious what you're seeing on that front?

Yes. To address your first question, we are currently awaiting the Integrated Resource Plan. We are considering various options, so it's likely to involve a combination of renewables and some thermal sources, along with batteries. As for your second question about wind, we have been developing a significant amount of wind energy in Brazil, and many of our upcoming projects will include a substantial portion of wind. For example, the green hydrogen project in Texas, which is 1.5 gigawatts, will primarily rely on wind energy. In the coming years, we anticipate a more balanced approach in the U.S. between wind and solar energy.

Okay. Thank you very much.

Thank you, Michael. Our next question comes from the line of Ryan Levine with Citi. Ryan, your lines are open.

Good morning, and thanks for taking my question. What is the timeline for the $92 million Colombia impact to return to historic norms? And what is the risk to achieving this ramp at this stage in the year?

Yes, conditions are already improving. I expect the fourth quarter to be better in Colombia compared to last year. All forecasts indicate that La Nina is likely to occur over the next few months and continue well into next year. Things are turning around now. Again, I anticipate the fourth quarter to be higher. Looking ahead to next year, I foresee overall growth in Colombia. The quarter alone had $92 million, while year-to-date, it's down $130 million compared to last year. This is the main factor driving the current situation, particularly within the Renewables segment. However, growth in the U.S. is making considerable progress to offset this, and I expect it to significantly exceed the downturn in the fourth quarter and into next year.

I would like to mention that we experienced a two-month outage. Unfortunately, this outage occurred at the worst possible time. Because we had rain that was 25% above anything previously recorded, if we hadn't had the outage, we could have utilized that water effectively during the drought that followed. Thus, being out for two months is part of the recovery process.

Okay. So then by 2026, you should be back to a more normal performance?

No, '25, Ryan. So the conditions are already improving. We expect this quarter, fourth quarter to be higher than last year. And next year, in 2025, we expect normal to better hydrology from the La Nina.

Okay. And then maybe switching gears, as you referenced in your prepared comments, impact to California spark spreads, are you looking to change your hedging strategy there? Or any color you could share around the outlook going forward for the Southland?

Yes. Just as a reminder, the Southland structure has a 20-year contract for capacity and energy, providing us with a predictable revenue stream. Annually, we can choose a year in advance whether to market the energy ourselves and hedge it or put it under the power purchase agreement. For 2024, we decided at the end of 2022 to take the energy for ourselves and market it. Unfortunately, spark spreads changed significantly after that decision, and we are now executing our hedge program, which resulted in some downtime this year. However, compared to the put value, it was still a favorable decision. We have also made the same decision for 2025, opting to market the energy. We are already over 95% hedged at values well above the put value. The market has changed and compressed due to better hydro conditions, milder weather, and increased battery penetration in California. As a result, the long-term market value is not as high as it was in 2022 when we initially made that decision. Nevertheless, we believe our strategy has still added value beyond the put, even if it hasn't been as much as we anticipated when we provided our guidance.

As a follow-up, considering your framework and decisions for next year, can you provide any insights on the expected performance of that asset for '25 based on your group's decisions?

Yes. I would say, at this point, since we've already decided on '25, it is in excess of the put value. And we're already nearly 100% hedged, 95% hedged, as I said. So it the value is lower than it was in the original guidance, but still above had we taken a no-risk strategy. And then for 2026, we have not yet made that decision. And we'll have to here later in the fourth quarter, and we'll update you all on that later. And that will be based just upon what we see in the hedge market at the time relative to the put value.

Thanks for taking my question.

Thank you, Ryan. Our next question is from the line of Richard Sunderland with JPMorgan. Richard, your line is open.

Thanks for the time. I know you've covered a lot of ground. Just one quick cleanup. You've talked at various points about the asset sale program and how you've thought about timing that and affecting that it sounds like more to come on year-end around that. But just curious how you're thinking about monetizing the new energy technologies investments? And if that's something that should fall within the planned period? Any thoughts there.

When you think about the new energy technologies, look, what we've talked about is through 2027. And we approached these strategically. So what we've always said is that we will monetize these assets when we feel it's appropriate. And when we are out of long-term venture capitalist investors. So we'll monetize them at the right time when we don't think we're adding a lot of value. And we've already done some monetization and taking some money off the table. So it's been a very successful program. And I think there's a lot more value there than is being recognized by most of the parts. But what I would say is that so long as we add a lot of value, we'll stay in. However, we'll continue to opportunistically monetize. And certainly, we're well ahead of our plan for 2027. But as Steve mentioned, the universe is greater. So it would include some things from new energy technologies.

Great, thank you.

Thank you, Richard. There are no additional questions waiting at this time. So I'll turn the call back over to Susan Harcourt for 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. We look forward to seeing many of you at the EEI Financial Conference later this month. Thank you, and have a nice day.

That concludes today's conference call. Thank you for your participation. I hope you have a wonderful rest of your day.