AES reaffirms 2025 guidance and targets 4 GW of new PPAs amid 46% renewables EBITDA growth

Earnings Call Insights: The AES Corporation (AES) Q3 2025

MANAGEMENT VIEW

* Andres Ricardo Gluski Weilert, President, CEO & Director, reaffirmed full year 2025 guidance and long-term growth rates for adjusted EBITDA, adjusted EPS, and parent free cash flow, stating the company is “well positioned going into 2026” and remains “fully on track with our credit ratings.” He announced that AES is on pace to sign 4 gigawatts of new PPAs this year, with 2.2 gigawatts already signed and advanced negotiations expected to bring in at least an additional 1.8 gigawatts. Gluski emphasized a 46% increase in year-to-date renewables EBITDA, driven by organic growth and maturing U.S. renewables businesses, with the U.S. installed capacity projected to be nearly 60% larger than two years ago.
* Gluski also addressed the completion of 3.2 gigawatts of construction projects this year, with 2.9 gigawatts completed year-to-date, and detailed the repowering of 1.2 gigawatts of natural gas at AES Indiana, scheduled to be operational in 2026. He highlighted a recently signed Development Transfer Agreement with a large data center customer, marking AES’s first DTA involving the transfer of a data center site.
* Stephen Coughlin, Executive VP & CFO, stated, “Third quarter adjusted EBITDA was $830 million versus $698 million a year ago. This was driven by significant growth from new renewables projects, rate-based investment at our U.S. utilities, and continued progress on our cost savings program announced on the fourth quarter call.” Coughlin further noted that “adjusted EPS increased to $0.75 per share versus $0.71 in the prior year” and mentioned the realization of most of the $150 million cost savings for this year, with a $300 million annual run rate targeted for 2026.

OUTLOOK

* The company reaffirmed full year 2025 adjusted EBITDA guidance of $2.65 billion to $2.85 billion and adjusted EPS guidance of $2.10 to $2.26. Coughlin explained, “We have already achieved more than 3/4 of the midpoint of our guidance in the year-to-date. And I am highly confident in our full year range.” AES also reiterated a 5% to 7% long-term growth rate for adjusted EBITDA through 2027 and expects a “strong step-up over the next 2 years with our growth rate increasing to the low teens next year.”
* The company indicated that long-term guidance through 2027 “understates the actual run rate earnings power of our portfolio,” pointing to an incremental $400 million of run rate EBITDA from projects expected to come online during or after 2027.

FINANCIAL RESULTS

* Adjusted EBITDA for the third quarter was $830 million, up from $698 million in the prior year, attributed to growth in renewables, rate-based utility investments, and cost savings. Adjusted EPS reached $0.75 per share, compared to $0.71 in the prior year, with drivers similar to EBITDA but partially offset by higher depreciation, interest expense, and lower renewable tax attribute recognition.
* The renewables SBU growth was primarily driven by 3 gigawatts of new capacity brought online since Q3 2024. Utilities SBU reported higher adjusted pretax contribution from $1.3 billion in rate base investments over the previous four quarters. The company exceeded its full year 2024 renewables EBITDA in the first three quarters of 2025.
* AES has already realized the majority of its $150 million cost savings target for 2025 and is on track for a $300 million annual run rate in 2026.

Q&A

* Nicholas Campanella, Barclays Bank PLC, Research Division, questioned if AES anticipates surpassing the 5% to 7% long-term EBITDA growth range. Coughlin responded that the company is “reaffirming the 5% to 7% through 2027” and explained the $400 million incremental EBITDA represents projects in backlog that will contribute post-2027.
* Campanella also asked about parent funding and balance sheet capacity. Coughlin stated, “Our top priority is continuing to strengthen our balance sheet and keeping our investment-grade ratings strong... We are self-funded through 2027. We see an ability to extend that self-funding even beyond that point. And we do not have any plans to issue equity in this horizon.”
* David Arcaro, Morgan Stanley, queried about data center demand and booking pace. Gluski responded that demand from data centers and corporate customers remains strong and project bookings are “lumpy,” noting a focus on “bigger projects, more profitable projects.”
* Julien Dumoulin-Smith, Jefferies LLC, asked about utility opportunities and powered land partnerships. Ricardo Falu, COO, indicated advanced negotiations in Indiana for deals in the 1.5 to 2.5 gigawatt range and highlighted the co-located, grid-interconnected nature of the powered land opportunity.
* Dimple Gosai, BofA Securities, asked about data center PPA returns and pricing. Coughlin replied, “The returns on these tend to be at the higher end of our 12% to 15%,” and Gluski emphasized the importance of a secure supply chain.

SENTIMENT ANALYSIS

* Analysts maintained a neutral to slightly positive tone, with questions focused on growth pacing, funding needs, and strategic project returns, but expressed confidence in the company’s explanations and reaffirmed targets.
* Management’s tone was confident and assertive both in prepared remarks and Q&A, with frequent use of “we are confident,” “well positioned,” and “highly confident.” Responses to analyst concerns were direct and detailed, especially when addressing funding, growth rates, and project returns.
* Compared to the previous quarter, analyst sentiment remained steady, while management’s confidence appeared more pronounced given the 46% renewables EBITDA growth and strong execution on guidance.

QUARTER-OVER-QUARTER COMPARISON

* AES maintained its 2025 guidance and long-term growth targets in both quarters, but the Q3 call highlighted exceeding 2024 renewables EBITDA in the first three quarters of 2025 and a 46% year-to-date renewables EBITDA growth, compared to a reported 56% quarterly growth in Q2.
* The Q3 call provided more clarity on the realization of cost savings, progress on construction projects, and the incremental $400 million EBITDA expected post-2027. Data center partnerships and powered land solutions received greater emphasis this quarter.
* Management tone was consistent, but the current quarter’s call included stronger language about derisking and future earnings power.
* Analyst focus shifted more toward the sustainability of growth, returns on new projects, and balance sheet self-funding.

RISKS AND CONCERNS

* Management cited the importance of maintaining bill affordability, holding operations and maintenance costs flat for five years, and ensuring reliable grid investments amid increased demand.
* Gluski noted that AES’s safe-harbor pipeline and robust supply chain position the company to weather scarcity of ready-to-build projects and regulatory uncertainties.
* Analysts questioned the pace of PPA signings, risk from regulatory lag, and the impact of new data center procurement models on returns. Management emphasized project quality, supply chain security, and advanced negotiations to address these risks.

FINAL TAKEAWAY

AES management underscored strong execution against strategic goals, highlighted by a robust 46% increase in renewables EBITDA, reaffirmation of 2025 guidance, and a clear pathway for continued growth through 2027 and beyond. With a record construction pipeline, innovative data center partnerships, and a disciplined approach to funding and cost control, the company emphasized its confidence in delivering shareholder value while navigating evolving market demands and regulatory landscapes.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/aes/earnings/transcripts]

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