Image source: The Motley Fool.
DATE
Wednesday, Nov. 5, 2025 at 10 a.m. ET
CALL PARTICIPANTS
President and Chief Executive Officer — Andrés Gluski
Chief Financial Officer — Steve Coughlin
Executive Vice President and President, Utilities — Ricardo Falú
Vice President, Investor Relations — Susan Harcourt
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
Adjusted EBITDA -- $830 million for the quarter, up from $698 million a year ago, primarily driven by new renewables projects and rate-based utility investments.
Adjusted EPS -- $0.75 per share, compared to $0.71 in the prior year, with the increase partially offset by higher depreciation, interest expense, and lower renewable tax attribute recognition due to timing.
Renewables EBITDA Growth -- 46% increase year-to-date, attributed mainly to organic growth from new project completions and operational scale improvements.
Data Center PPA Signings -- 2.2 gigawatts signed year-to-date, with expectations to reach at least four gigawatts by year-end as advanced negotiations continue.
Project Backlog -- 11.1 gigawatts, with 4.8 gigawatts under construction and targeted for completion through 2027.
Safe Harbor Pipeline -- 7.5 gigawatts in the U.S. backlog is fully safe harbored, supporting tax credit realization through 2030, with an additional four gigawatts in the pipeline and more targeted for safe harboring ahead of the 2026 deadline.
Utilities Rate Base Investment -- $1.3 billion invested over the prior four quarters, contributing to higher pre-tax utility segment contribution.
Ohio Rate Settlement -- Unanimous settlement filed for a $168 million annual revenue increase and a nearly 10% ROE, with rates potentially effective as early as November 2025.
Cost Savings Program -- Majority of $150 million in annualized savings already achieved for 2025, with a $300 million annual run rate targeted for 2026.
Credit Ratings -- All three major rating agencies reaffirmed investment-grade status with a stable outlook, including a Moody's update in September.
Guidance Reaffirmation -- Full-year 2025 guidance reaffirmed for adjusted EBITDA ($2.65-$2.85 billion), adjusted EPS ($2.10-$2.26), and parent free cash flow ($1.15-$1.25 billion).
Long-Term Growth Outlook -- 5%-7% adjusted EBITDA growth reiterated through 2027 from the Investor Day midpoint, with a projected step-up to low teens growth in 2026.
Dividend and Growth Investments -- Over $500 million in dividends planned for 2025, alongside about $1.8 billion in new growth investments, primarily in renewables and utilities.
Debt and Leverage Metrics -- $400 million subsidiary debt repaid; consolidated Moody's FFO to net debt metric tracking above the 10%-11% 2025 target and aiming for 12% by end of 2026.
Asset Sales -- Completion of targeted asset divestitures, including the sale of AES Brazil and sell-downs in AES Ohio and Global Insurance.
Data Center Development Transfer Agreement -- New DTA signed in the quarter with a large data center customer, representing the company's first for powered land transfer to a data center site.
SUMMARY
The AES Corporation (AES +6.40%) reported substantial increases in renewables-related EBITDA, completed a major wave of rate-based utility investments, and finalized regulatory settlements supporting long-term growth initiatives. Management detailed progress in converting its renewables pipeline to secure PPAs, highlighted the competitive advantage of its safe-harbored tax credit pipeline, and confirmed significant forward rate base growth supported by new data center and transmission demand. The company reinforced its self-funding position through 2027 and stated no plans for new equity issuance within the current planning horizon. Capital allocation priorities were underscored by ongoing dividend returns, future debt issuance to fund growth, and explicit execution of cost reduction strategies.
CFO Steve Coughlin indicated, "our EBITDA has reached an inflection point," referencing 46% renewables EBITDA growth and signaling expectations for roughly 50% segment growth by year-end.
Management stated the $400 million incremental run-rate EBITDA expected after 2027 "does not require any additional project development or PPA signings" and will result from projects already supported by existing backlog and in-progress investment.
No further utility rate base increases are planned for AES Indiana until 2030, following the current partial settlement agreement which included a $105 million reduction to the initial revenue increase request.
Nearly half of four gigawatts of backlog for data center-related projects is currently under construction and scheduled to be added within the next 18 months.
More than 50% of newly developed solar projects are being paired with battery storage, indicating a shift towards hybrid and grid-supportive solutions in response to customer and grid requirements.
CFO Steve Coughlin confirmed, "We are self-funded through 2027" and expects this financing structure to be sustainable beyond 2027, absent new equity plans.
INDUSTRY GLOSSARY
PPA (Power Purchase Agreement): A long-term contract for the sale of electricity from a generator to a purchaser, typically specifying volume and price.
Safe Harbor: A designation allowing projects to qualify for tax credits under specified legal or IRS terms by meeting certain requirements (such as beginning construction before a given deadline).
DTA (Development Transfer Agreement): An agreement transferring ownership of a project development asset, such as "powered land," coupled with related energy infrastructure commitments.
FFO (Funds from Operations): A cash-flow metric measuring a company's ability to generate recurring funds available for debt service and investment, often used for credit rating analysis in utilities.
Rate Base: The value of utility assets on which a regulated utility is permitted to earn a specified rate of return as approved by regulatory authorities.
ROE (Return on Equity): A financial ratio indicating the expected or achieved profitability for equity investors, often set by regulators for utility rate cases.
IRP (Integrated Resource Plan): A long-term strategic planning document filed with regulators outlining projected capacity requirements and plans for generation and transmission investments.
Full Conference Call Transcript
Andrés Gluski: Good morning, everyone. And thank you for joining our third quarter 2025 financial review call. Today, I will address our year-to-date progress on our financial and strategic objectives and speak to key developments in our renewables and utility businesses. Following my remarks, Steve Coughlin, our CFO, will further discuss our financial performance and outlook. First, I am pleased to reaffirm our full-year 2025 guidance and long-term growth rates, including adjusted EBITDA, adjusted EPS, and parent free cash flow. We are executing according to our plan. We are well-positioned going into 2026.
We remain fully on track with our credit ratings and have received credit opinions from all three major agencies, confirming our investment-grade rating with a stable outlook, including from Moody's in September. Second, we are confident that we will sign four gigawatts of new PPAs this year as we deliver the energy solutions that our customers need at attractive returns. Year-to-date, we have signed 2.2 gigawatts and expect to sign at least an additional 1.8 gigawatts before the end of the year. We are in advanced negotiations on several large projects. Similarly, we are on schedule to complete 3.2 gigawatts of construction projects this year, with 2.9 gigawatts already completed year-to-date.
An additional 4.8 gigawatts of our 11.1 gigawatt backlog is under construction and expected to be completed through 2027. We are also repowering the 1.2 gigawatts of natural gas at AES Indiana, which is scheduled to be operational next year. This significant construction program provides a clear line of sight to EBITDA growth through our guidance period and beyond. Turning to slide five, we have seen a 46% increase in our renewables EBITDA year-to-date, driven primarily from the organic growth of new projects coming online and the maturing of our U.S. Renewables businesses. By year-end, the installed capacity of our U.S. business will be almost 60% larger than it was just two years ago.
We are seeing projects with higher returns come online as we benefit from substantial economies of scale in purchasing, construction, and operation. These benefits are particularly evident as the average size of our projects has increased by over 50% over the past five years. Turning to slide six, we are also benefiting from the completion of projects serving data centers that we have signed over the last few years. Of 8.2 gigawatts, 4.2 gigawatts are in operation, and four gigawatts are in our backlog. Nearly half of these remaining four gigawatts are under construction and will be added to our fleet in the next eighteen months.
Additionally, and leveraging on our development capabilities, this quarter we signed a development transfer agreement or DTA with a large data center customer to provide them with powered land for a data center site adjacent to two of our power projects. In the past, we have signed DTAs with utility customers to develop and transfer power prices, but this is our first involving the transfer of a data center site. We will provide more details on this powered land solution in the future as we continue completing milestones and are ready to announce it with the customer. Moving to slide seven, we continue to see very strong demand across the sector, with our customers overwhelmingly focused on time to power.
Given the overall scarcity of ready-to-build projects, The AES Corporation is well-positioned to meet the urgent need for energy due to our advanced pipeline of development projects, robust domestic supply chain with no FIAC exposure, and secured tax credit position. As a reminder, our 7.5 gigawatt U.S. backlog is entirely safe harbored, and in our pipeline, we have an additional four gigawatts with safe harbor protections. We also have line of sight to safe harbor an additional three to four gigawatts before July 4, 2026, enabling us to bring online projects with tax credits through 2030.
As we move toward the end of the decade, our safe harbor projects that qualify for tax credits will give us a growing competitive advantage. This will help us serve our customers with reliable and low-cost power. Moving to our U.S. Utilities, beginning on slide eight, we are focused on our core mission of serving our customers with affordable and reliable power as we address the increased demand that we are seeing in our service territories. Across Indiana and Ohio, we are among the lowest cost providers in each state, a position we expect to maintain following the resolution of our active rate cases.
Turning to Indiana on slide nine, earlier this year, we filed for a rate review with the Indiana Utility Regulatory Commission. This rate case represents and we have been disciplined in holding our operations and maintenance costs flat for the last five years. As such, a rate increase request is less than the cumulative impact of inflation since our last rate adjustment. I am pleased to report that in October, we filed a partial settlement agreement which included parties such as the City of Indianapolis. We expect the final order in Q2 of next year. We still expect our residential rates to be at least 15% lower than the average rates in the state.
Furthermore, we are making excellent progress on our generation program at AES Indiana, which includes the construction of new facilities to replace aging infrastructure and improve system reliability. Earlier this year, we brought online a 200 megawatt Pike County project, the largest energy storage facility in MISO, and we are on track to complete an additional 295 megawatts. Last week, we filed our integrated resource plan with IURC, laying out a twenty-year outlook and short-term action plan for our generation portfolio. Our IRP submission evaluated scenarios with and without new data center load as we see the potential for significant new demand in our service territory.
With new load coming online towards the end of the decade, as we work with data center customers, we are committed to ensuring that new load will lower costs for all existing customers as we spread fixed costs across a larger customer base. We will announce these arrangements with more specificity in due course. Turning to AES Ohio on Slide 11, where we have 2.1 gigawatts of signed data center agreements and expect more to come. I should note that in Ohio, our data center-related investments are for transmission and are supported by FERC formula rates with no regulatory lag. By 2027, we expect transmission to represent 40% of our total rate base.
We are now also in the final stages of our distribution rate review. Since our last call, we filed a unanimous settlement including all customer classes and Puko staff. The settlement includes an annual revenue increase of approximately $168 million and an ROE of nearly 10%. We expect to have our final order in the very near future, with rates effective as early as this month. Looking ahead, we plan to file our next rate review next week as we work towards the transition in Ohio's regulatory framework away from the existing ESP model.
In this filing, we will be using forward-looking test years from 2027 to 2029 as we seek to further optimize our current rate structure and reduce regulatory lag. With that, I would now like to turn the call over to our CFO, Steve Coughlin.
Steve Coughlin: Thank you, Andrés, and good morning, everyone. Today, I will discuss our third quarter results and our 2025 guidance and parent capital allocation. First, turning to adjusted EBITDA on slide 13. 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. We have already realized the majority of the $150 million in cost savings for this year, and we are on track to achieve a $300 million annual run rate in 2026.
These drivers were partially offset by the sale of AES Brazil and the sell-downs of AES Ohio and our Global Insurance business. Turning to slide 14, adjusted EPS increased to $0.75 per share versus $0.71 in the prior year. Drivers were similar to adjusted EBITDA, partially offset by higher depreciation and interest expense and lower renewable tax attribute recognition mainly due to timing. We also benefited from a slightly lower adjusted tax rate. Next, I will cover the performance drivers within each of our strategic business units. Beginning with our renewables SBU on Slide 15. Our strong growth was primarily driven by the three gigawatts of new capacity brought online since Q3 2024.
Our results were also driven by the continued benefit from cost reductions and scaling down of development spending as our pipeline has continued to mature. Lastly, the net effect of moving Chile renewables to the renewables SBU this year was more than offset by the sale of our five gigawatt AES Brazil business. Turning to slide 16, we have made excellent progress so far this year toward achieving our full-year Renewables EBITDA guidance and have already exceeded our full-year 2024 EBITDA in just the 2025. We expect to continue this momentum in the year to go, driven by our expanded operating fleet and full realization of our cost savings objectives.
As the size of our operating portfolio increases, while our development spending and overhead decline, our operating margins are significantly improving. In addition, hydro conditions in Colombia have normalized compared to last year, and we expect to realize the largest benefit in our fourth quarter results. Turning back to our third quarter results on slide 17. In the Utilities SBU, higher adjusted pretax contribution or PTC in the quarter was mostly driven by the $1.3 billion of rate-based investments we have made over the previous four quarters to improve reliability and customer experience. This was partially offset by the 30% sell-down of AES Ohio that closed in April.
At our energy infrastructure SBU, higher EBITDA primarily reflects our acquisition of the remaining ownership in the Cochrane coal plant, cost savings, and the commencement of operations at our Gatun gas plant last year. This was partially offset by the Chile renewable assets moving to our renewables segment in 2025. Finally, EBITDA at our New Energy Technologies SBU was relatively flat versus a year ago, with no material drivers. Turning to our 2025 EBITDA guidance on slide 20. We have already achieved more than three-quarters of the midpoint of our guidance in the year to date, and I am highly confident in our full-year range of $2.65 to $2.85 billion.
Growth in the year to go will be primarily driven by the continued strong increase in contributions from new renewables projects, rate-based investment in our U.S. Utilities, normalized results at our Colombian hydro assets, and the full realization of our $150 million cost savings target. Looking at the right-hand side, we are also reaffirming our adjusted EPS guidance of $2.10 to $2.26. In addition to the drivers of adjusted EBITDA, we expect slightly higher tax credit recognition on new renewables projects, partially offset by higher interest expense as a result of new debt for our growth investments and a slightly higher adjusted tax rate.
Looking beyond this year on Slide 21, we are also reaffirming our 5% to 7% long-term growth rate for adjusted EBITDA through 2027 from the midpoint of guidance we gave at our Investor Day in 2023. Notably, we expect a strong step-up over the next two years with our growth rate increasing to the low teens next year. We expect to have significantly less drag from asset sales and coal retirements going forward, and instead, our overall results will be driven by new EBITDA contributions from our 11.1 gigawatt renewables backlog and 11% utilities rate base growth. It is important to highlight that our long-term guidance through 2027 understates the actual run rate earnings power of our portfolio.
Looking beyond 2027, we expect to earn an incremental $400 million of run rate EBITDA. This is from projects that we expect to be either still under construction at the 2027 or that will come online during 2027 and will contribute a full year of EBITDA in 2028. This $400 million does not require any additional project development or PPA signings but represents the full realization of investments we will have already made by the end of our guidance period. Slide 22. Sources reflect approximately $2.7 billion of total discretionary cash, including achieving the upper half of our $1.15 billion to $1.25 billion parent free cash flow target.
We achieved our asset sale target with the sell-down of our Global Insurance business in the second quarter, and we expect to borrow an additional $500 million at the parent to continue funding growth. On the right-hand side, you can see our planned use of capital. We will return more than $500 million of dividends to shareholders this year while investing approximately $1.8 billion toward new growth, primarily in the renewables and utilities businesses. We have also repaid approximately $400 million of subsidiary debt. Our balance sheet and cash flow generation remain strong, consistent with our investment-grade credit ratings.
Our consolidated Moody's FFO to net debt metric is tracking ahead of the agreed path of 10% to 11% in 2025, and we are confident in achieving the 12% target by the end of 2026. In summary, we have demonstrated the high growth of our Renewables and Utilities businesses and our excellent track record of completing projects on time and on budget. Since we initiated our long-term plan in 2023, we brought 10 gigawatts of projects online and signed another 12 gigawatts while investing nearly $4 billion in the rate base at our U.S. Utilities. We are extremely well-positioned to achieve our 2025 guidance and long-term growth rates through 2027, and our plan remains largely de-risked.
I look forward to meeting with many of you next week at the EEI Financial Conference. With that, I will turn the call back over to Andrés.
Andrés Gluski: Thank you, Steve. Before we open the call for questions, I want to reiterate how pleased I am with our execution this year. We remain firmly on track to achieve all of our strategic and financial objectives, and we have made significant progress growing our renewables business, as evidenced by the 46% increase in renewables EBITDA year-to-date. The primary driver of this EBITDA growth is the three gigawatts of new capacity completed over the last twelve months. Our construction program provides a clear line of sight to continued EBITDA growth through our guidance period and beyond. These results demonstrate the strength and resilience of our strategy and our ability to bring new projects online efficiently and at scale.
As a diversified power company, we are well-positioned to deliver the technology and solutions our customers need, whether through renewables, our utilities, or our energy infrastructure business. Our safe harbor pipeline, a robust domestic supply chain, and deep customer relationships give us a competitive advantage as we meet the growing demand for reliable, low-cost power. I am confident that our continued focus on execution will drive value for our shareholders as we move into 2026 and beyond. With that, I would like to ask the operator to open up the call for questions.
Operator: Thank you. Our first question comes from Nick Campanella from Barclays. Your line is now open. Please go ahead.
Nick Campanella: Good morning. Thanks for taking my question and for all the updates.
Andrés Gluski: Good morning, Nick.
Nick Campanella: Maybe hey. Morning. Just I heard your comments on the 5% to 7% long-term growth on EBITDA, very confident in that through '27 as well as the disclosure about the $400 million of EBITDA beyond '27. Maybe just with the asset sales progressing, are you trying to communicate that you are going to be above this range as we look out to '27? And then more within the range as we look to '26? Or maybe can you just walk through some of the moving pieces that we should kind of consider there?
Steve Coughlin: Yes. Nick, it is Steve. So we are reaffirming the 5% to 7% in 2027. When we referenced the $400 million in our remarks, we are talking about the fact that we expect to have projects coming online in 2027. And projects that are still in construction at the '27, this is primarily from things that are already in the backlog. That will be yielding an incremental $400 million of EBITDA beyond 2027. So in '28 and in '29 on an annualized basis. So the capital that we have provided includes the investment and the debt for that but obviously not the EBITDA since these are projects that would not be completed.
Or at least not full year contributing in 2027. So that was the point there. We are really confident in our 5% to 7% guidance through the period. As you know, we have really de-risked the business. We have the long-term contracted generation is where it is coming from as well as attractive returns in the utilities. So over the long term, see this as a very solid plan to achieve that target. Note that we have 11.1 gigawatts of projects in our backlog, which is roughly three to four years of built-in growth already. And the other driver is utility rate base growth, which at roughly 11% as we have guided to.
And there is upside to that with the new data center load that is in advanced negotiations that we have been talking about. So we feel really good about the 5% to 7%. The other thing to note is that the energy infrastructure, we have had more of the coal retirements, more of the asset sales, that is really starting to level off. So when you look at the overall growth of The AES Corporation, it is no longer somewhat offset by that decline in energy infrastructure to that same degree. So we see a very favorable path here to the 5% to 7% and then even beyond that.
Nick Campanella: Okay. That is helpful. And then you know, maybe just a comment on parent funding going forward just as you look towards accelerating growth in renewables further, just what is the balance sheet capacity look at this point? Look at like at this point? How should we think about the need for additional equity in any new plan or if you plan to just fully mitigate that and should not be any equity? And maybe you can just comment on how you are thinking about it. I think there is a January parent maturity for next year. Thanks.
Steve Coughlin: Yes. Thanks, Nick. So look, our top priority is continuing to strengthen our balance sheet and keeping our investment-grade ratings strong. So that is the focus throughout our planning and our decision-making. It is not about gigawatt growth but rather profitable growth with attractive returns that helps us achieve our balance sheet and our financial objectives. So keep in mind, we have already done a lot here to support the balance sheet. We have removed $2 billion of cash through the actions we took earlier this year.
Reducing overhead, resizing our development efforts, driving efficiencies throughout the organization, we have also successfully executed sell-downs that have helped delever the business, for example, in AES Ohio, the sell-down TTBQ was largely used to reduce debt in the Ohio HoldCo. So and then in renewals, we are focused on pursuing fewer but larger new projects with returns in the upper half of our 12% to 15% guidance range. On top of all that, our EBITDA has reached an inflection point as you can see with the Renewables segment which has already grown 46% this year. It will likely be around 50% by the end of the year. So we see the strong EBITDA, strong growth in FFO.
And so we see ourselves on a path to keep the balance sheet healthy. 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.
Nick Campanella: Thank you.
Andrés Gluski: Thank you, Nick.
Operator: Thank you. Our next question comes from David Arcaro from Morgan Stanley. Your line is now open. Please go ahead.
David Arcaro: Thank you. Good morning. Good morning, Dave. I was wondering if you could comment on good morning, wondering if you could comment on whether you have seen an acceleration in demand following the treasury guidance a couple of months ago and generally what you are seeing from both the data center industry and their interest level in renewables. And we would be curious if you could just maybe put that in context of the slower bookings and contracting activity. That it looks like you experienced this past quarter?
Andrés Gluski: Sure. Look, we see very strong interest from our data centers and our corporate customers. I would say that in our case, two things. One is I have always said this is lumpy. And so we are doing fewer projects, larger projects. So there is no reason to expect that these are going to be evenly distributed around four quarters. So we feel confident we will hit our four gigawatts. Now having said that, I think not all gigawatts are made the same or equal. So we are more than focusing on a number of gigawatts. We are focusing on is the quality of those gigawatts.
We have a pipeline of safe harbored projects and we want to make the most value from those projects. So what really counts is how profitable are the projects you are doing. As we have said, our projects are on average 50% larger than they were five years ago. So we are going for bigger projects, more profitable projects, we are hitting we are trending towards the upper end of our IRR guidance. We feel very comfortable about that. So demand is there. The question is how do you optimize that asset you have what I would call it safe harbored projects. And look, there is interest beyond that horizon as well.
So very strong demand for renewables because look, that is what can get built this window. There can be talk about nuclear or other technologies. Those take years to build. So what is going to meet the majority of the demand, well, this year, it is probably going to be 90% as renewable and batteries. It very likely will be next year as well. So very strong demand from our clients. And we are working very well with them.
David Arcaro: Excellent. That makes sense. Appreciate that extra color there. And separately, so I guess we are seeing indications that storage battery storage is being incorporated into more data center plans. I am curious, what are you seeing on the ground in terms of storage demand? How big an opportunity could that be for on-site storage development on your end? And potentially at data centers?
Andrés Gluski: Well, look, energy storage is really critical to meet the growing demand that we are seeing. So it is like a hammer. It has many, many uses. So definitely, there is a behind the meter use in the data centers themselves to smooth out their demand. And also to have very fast reaction should there be any interruption if they are being by the grid. That is number one. Number two is quite frankly using renewables to provide a dispatchable energy for a longer period of time and transmission as well. So already more than half of our solar projects come are coming with batteries. And I would expect more demand for stand-alone batteries. For grid services into the future.
So batteries will be very strong even gas plants. If you have a peaking gas plant, can dispatch it more efficiently if you put batteries on it. One of the first applications we actually had with battery was on a fossil plant. In Chile. So again, many, many users we see strong demand and we do see demand for behind the meter as well at the data center itself.
David Arcaro: Okay. Great. No. Thank you so much. Appreciate it. Thanks.
Operator: Thank you. Our next question comes from Julien Dumoulin-Smith from Jefferies. Your line is now open. Please go ahead.
Julien Dumoulin-Smith: Hey, good morning, team. Thank you guys for the time as always. Look, I wanted to focus first on the utility opportunity and that and it raises in as much as, obviously, you have the higher the IRR update here to Polkow the other day. Can you give us a little bit of a sense of how far things are advanced there? Mean, we obviously take note of what happened with NiSource here recently. And then separately, we saw the revisions of PJM at DPL here recently. You guys cite two gigawatts potential advanced negotiations. I think the pipeline is up to six gigawatts. How would you set expectations at both in terms of near-term opportunities?
And how does that compare against the guidance that you guys gave previously? I know the 11% rate base growth how would you help frame and sensitize that out?
Ricardo Falú: Thank you, Julian. Good morning. This is Ricardo. So I would say in terms of AES Indiana, we are in advanced negotiations. I think the IRP that we filed last week represents sort of the potential scenarios and the opportunity that we are currently pursuing. We expect to be in a position to announce the deals in the next couple of months. But I think in the IRP you see that we run scenarios ranging from 500 megawatt to 2.5 gigawatt. I think we believe these deals will be more in the 1.5, 2.5 gigawatt range. But again, that is something we will be announcing soon.
Of course, that will include building the transmission as well as the generation capacity needed to support that massive load. I think in the case of Ohio, we have 2.1 gigawatt already signed. And I would say between the two utilities we have more opportunities that we are discussing with the hyperscalers that of course we will communicate and share more details as the deals materialize.
Julien Dumoulin-Smith: Got it. Excellent. And then just if you can elaborate a little bit on the Powered Land opportunity. You made some tantalizing comments here. In the remarks here. What exactly does this specific partnership with the data center look like? Is this co-located with a gas plant versus renewables? What exact permutation are you thinking about here? And how do you think about extracting value? Is this about using existing assets? Or allowed to co-locate and have to build bring new generation as well as part of this arrangement? Mean, just love to hear the parameters as best you see this coming together as an example.
And how much further you see if you see for this, the extent to which it is a co-located thermal opportunity?
Andrés Gluski: Okay. No, this is a co-located opportunity. And it is interconnected really with the grid, but also with renewables. So it is a co-located opportunity. We helped develop the site. And we are monetizing this. And we will provide more color as this project progress and we can announce it jointly with our client.
Julien Dumoulin-Smith: Okay. Alright. Fair enough. Sounds like we gotta stay tuned. And then on Uplight, anything to say there? I just noticed that in the queue here.
Andrés Gluski: Well, you know, Uplight, you know, it was our JV with Schneider Electric. And it has added more capacity to it. Things like autogrid were taken in, so it has a bigger offering. But that market was a bit tough. In the sense that with the uncertainty that they were in the markets, the sales of new services were lower. We are seeing that market pick up now. But yes, there definitely was a slowdown and the ability to absorb new lines of business in that JV.
Julien Dumoulin-Smith: Yeah. No. I was struck by the virtual power plant business being down. Alright. Excellent. Thank you, guys. Appreciate it. Take care. Talk to you soon.
Operator: Thank you, Julian. Thank you.
Operator: Thank you. Our next question comes from Dimple Gosai from Bank of America. Line is now open. Please go ahead.
Dimple Gosai: Good morning. Thanks for taking my question. Your slides kind of reaffirm strong data center PPA track versus 1.6 gigawatts kind of signed year-to-date. Can you quantify how contracted ROIC or unlevered return on recent data center PPAs compared to your legacy book? And how pricing has moved in the last six to twelve months? And then I have a follow-up, please.
Steve Coughlin: On the data center deals? Yeah. So you know, these are made good progress. So we have signed a total of 2.2 gigawatts to date. Of PPAs. We feel very comfortable hitting the minimum of four gigawatts that we signed set out to achieve to get to the 14 to 17 gigawatt total. The 1.6 is the portion of that is with data centers. Notably, I think you saw a slide where we have we are already doing we already have in operation 4.2 gigawatts another total of four gigawatts of in construction or backlog with data centers including the 1.6 for a total of 8.2.
That also does not include our utility business with data centers, so that is just around power powering data centers through directly from PPAs. The returns on these tend to be at the higher end of our 12-15%. They are these are projects that are in high demand. The time to power is extremely important. And so because we have been developing a pipeline for many years now, we have projects that are ready. We are not just coming to this to put projects together at the last minute. We have been developing a 50 gigawatt pipeline for many years.
So we have projects that can meet the time to power needs that are in the locations where our partnerships with data center, hyperscalers have identified where they need power and so we prioritize their development efforts in that regard. And so, again, given the high demand the need for near-term projects, and our ability to structure the solutions creatively that these folks need you know, we are seeing returns in the upper part of our 12 to 15% return. I would also add that a key factor here is the supply chain. So as we said in the past, we basically had on-site or in-country everything that we needed for this year and next.
So this has been very favorable. We have not been affected by any tariffs. And starting in 2026, we will be relying on domestically produced key inputs. So I think an important element in terms of looking at returns of these projects is how we have such a secure supply chain in place. We also have very favorable arrangements with our contractors for construction. With we basically give them a series of constructions and they roll from one to the other. So all of these efficiencies are being reflected in the returns.
Dimple Gosai: Okay. And then the natural follow-up is that with hyperscalers increasingly exploring on-site and hybrid procurement strategies, and the shift towards behind the meter of colocated structures how does that actually change your development return risk mix? How do we kind of think of that going forward?
Andrés Gluski: Look, we see so much demand for the products that we are selling. That we do not think that is going to affect us. And really when you talk to the hyperscalers, first it is time to power. So any new announcements or you know, years in the future. But in addition, do you connect it to the grid. So I think as Steve said, it is having the created the opportunities and the right locations in the right markets is what they are really looking for. So look, the demand is so large. I do not see sort of cannibalization. Sort of behind the meter from the hyperscalers.
Operator: Thank you. Our next question comes from Steve Fleishman from Wolfe Research. Your line is now open. Please go ahead.
Steve Fleishman: Hey, good morning. How are you guys doing?
Ricardo Falú: Very good. Good morning.
Steve Fleishman: Okay. Good. So just maybe a high-level question. Just as you are getting into this next period, of the plan, soon. Back a few years ago when you did the Analyst Day, you shifted to the EBITDA framework. Along with the earnings. And part of the earnings was just that they were lumpy and they hit one year. How are you thinking about that as you get into this next period? Are you going to really focus more on the EBITDA guide or still try and target like an earnings growth?
Steve Coughlin: Steve, so look, continue to see EBITDA being the best way to measure The AES Corporation portfolio today and going forward. The part of moving to it was to give recurring earnings from our contracted businesses related to the PPAs more related to the ongoing cash flow. Versus the EPS that is obviously very highly influenced by the lumpiness of tax credits and when projects get brought online. Given that now with the new law in the OBDA and the new guidance, we still see an extended track for tax credits. And so we believe they will continue to be significant influencers of the EPS and causing that lumpiness.
So we think EBITDA continues to be the best way to look at the portfolio. And also the EBITDA is reaching that inflection, as Andrés and I discussed in our prepared remarks, what is driving it forward now is both the fact that we have really scaled up the operating portfolio. So we have installed just over the past two years, 2024 and 2025, 6.9 gigawatts of new capacity. And we have grown the utility rate base by $1.3 billion in the past year in investment.
So we are seeing roughly going into 2026, from new projects about $250 million of new EBITDA from utilities about $100 million of new EBITDA from cost savings going from the $150 million this year to the full annualized $300 million. And so we really see just a significant inflection here. And, again, without the stepping down in the energy infrastructure, that we have seen to the same degree, those positives that I just mentioned are largely going to flow all the way through to the total AES. Of course, there will be some things that fall off. For example, the Maritza PPA does expire.
Next year, and have a partial offset, but not nearly to the same degree that things have been offsetting as we had been improving quality of the portfolio exiting markets where we were not seeing an attractive future for AES. It has been a quality story, but now it is both quality and a significant increase in the growth rate at the same time.
Steve Fleishman: Great. Okay. Just a couple of other tie-up questions. We think about this DTA type transaction, is there something related to this that would be an ongoing PPA or is this more of a build-own-transfer type thing or kind of a mix of both?
Andrés Gluski: It is a mix of both. It does have an ongoing PPA.
Steve Fleishman: Okay. Good. And then lastly, just on Indiana. Your point is very valid on the rate levels and kind of maybe just a little bit of bad timing in the rate case and cannot control just the politics. So just how important is it going to be to get do you think that the consumer groups or at least one of them on board in this settlement? Do you think or how should we just think about that aspect?
Ricardo Falú: Yes. Good morning, Steve. Thank you. This is Ricardo. So I think the partial settlement that we reached I think, strikes for the right balance between affordability and also the investments that are needed to have a reliable and resilient grid. As part of the agreement, AES Indiana agreed to reduce the original revenue increase by $105 million, which is 53%. And if you look at and also we are committing not to have another rate base increase until 2030. So all in all, it is since 2022, which was the last rate increase. So we are confident in this settlement going through the different steps in the regulatory process.
More important, as I mentioned, strike the right balance between affordability and the investments that are needed to have a reliable grid. Of course, we will always welcome the office of utility consumer counselor to join the settlement. They can do it at any time of this process. But in any case, we expect a positive outcome as the commission will need to roll for something that makes sense from an affordability as well as reliability.
Steve Fleishman: Okay. Now that makes sense. Thank you very much.
Ricardo Falú: Thank you, Steve.
Operator: Thank you. Our next question is from Anthony Crowdell from Mizuho. Line is now open. Please go ahead.
Anthony Crowdell: Hey, good morning. If I could follow-up on Steve's first question. When I think on the fourth quarter when you give us a roll forward, any thought to going out five years or does the company still plan to keep the outlook limited to three years?
Steve Coughlin: Hey. Anthony. It is Steve. I would expect to go to three years again. Think that is sufficiently long-term counting for things that will change naturally or in the world around us. But, I think we will go out to 2028 is what I would want you to expect.
Anthony Crowdell: And then lastly, if I follow-up on Julien's question, I apologize. I did not follow the difference. On the powered land solution, I am just wondering what is it between that program and also just maybe a PPA with a customer? And if it is easier offline, I could follow-up at EEI.
Andrés Gluski: We can give you more color, let us say, offline. But basically, one is power land where you develop the data center and it has an associated PPA with it. So there it is a different product that you are selling. One is energy over X number of years and the other one is actually providing the site on which you can provide you can build the data center.
Anthony Crowdell: Got it. So it would be AES would actually own the land, build the data center. And there is a PPA attached in a whatever hyperscalers would come in there and a one-stop shop all from AES?
Andrés Gluski: That is a way of thinking of it.
Anthony Crowdell: Great. That is all I had. Thanks so much.
Andrés Gluski: Thank you.
Operator: Thank you. We have a follow-up question from Dimple Gosai from Bank of America. Your line is now open. Please go ahead.
Dimple Gosai: Thank you. More of a housekeeping question, to be fair. I think you mentioned around 50% growth for the year in the renewables segment is the expectation here. But it looks like you need closer to 57% for the low end for the renewables EBITDA guidance based on the 4Q 2024 comp. So maybe can you comment on the key levers and considerations there that we need to consider to hit 2025 EBITDA guidance? Thank you.
Steve Coughlin: Hey, Dimple, it is Steve. So you are right that it actually is higher when you look at the prior year unadjusted for the Chile renewables, which moved into the segment this year. So the 50% includes when we adjust into 2024, on a pro forma basis, the Chile renewables that we were able to segregate from the thermal segment last year. And so that is the 50% that I am referring to. But it is even higher growth rate when you do not take that Chile into account at all 2024.
Operator: Thank you. We currently have no further apologies. We have a question from Aidan Kelly from JPMorgan. Your line is now open. Please go ahead.
Aidan Kelly: Guys, good morning. Can you hear me?
Operator: Now I cannot hear you. Apologies. We have lost connection with Aidan Kelly. We currently have no further questions. So I will hand back to Susan Harcourt for closing remarks.
Susan Harcourt: 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. Have a nice day.
Operator: This now concludes today's call. Thank you for joining. You may now disconnect your lines.