Andres Gluski
President and Chief Executive Officer at AES
Good morning everyone, and thank you for joining our fourth quarter and full year 2021 financial review call. Today, I will cover our full year results and discuss our strategy and areas of focus for this year. Before discussing our 2021 results and future plan, I want to state that we do not see any significant impact on our portfolio from the outbreak of hostilities in the Ukraine. Nonetheless, our thoughts and prayers go out to the Ukrainian people and government, and we hope for a speedy return to peace.
Now turning our focus back to our business. Today marks an important and exciting milestone for AES with the announcement of our intention to fully exit coal by year-end 2025. This accelerated goal is a result of our success in growing our renewables portfolio, and our backlog gives us the confidence to take this step. As a leader in the global energy transition, we are committed to the goals of the Paris agreement and achieving a net zero economy. We will work with our stakeholders to ensure a smooth transition while meeting our regulatory obligations. Our exit from coal will be modestly dilutive but we feel comfortable with our growth trajectory, and accordingly we are reaffirming our annualized growth target of 7% to 9% in earnings and cash flow Q [Phonetic] 2025.
Now moving onto our 2021 results and accomplishments. First, I am pleased to report our financial results including adjusted earnings per share of $1.52 which was in line with our expectation. Our 2021 parent free cash flow of $839 million exceeded our expected range of $775 million to $825 million. Second, we signed contracts for 5 gigawatts of new renewable projects significantly above our target of 3 gigawatts to 4 gigawatts that we set last year. In fact, according to Bloomberg New Energy Finance, AES signed more renewable deal with corporate customers in 2021 than anyone else in the world. Included in these deals were two groundbreaking arrangement to provide renewable energy on an hour by hour basis, 24 hours a day, seven days a week signed with Google and Microsoft. Third, Fluence successfully completed their IPO in November and have no foreseeable need for external funding to achieve their strategic and financial objective. Furthermore, Fluence has made progress towards mitigating the supply chain challenges they have faced which I shall discuss shortly. Finally, safety is our most important value. I'm very proud to report that our safety performance in 2021 was the best in our 40-year history with no major incidents recorded among roughly 25000 AES people, contractors and construction workers.
Today I will be discussing two things: First, executing today; and second, investing for the future. Beginning with executing today on Slide 4. Even as we are transitioning to a carbon free future, we are laser focused on delivering on our commitments. Our business model has proven itself to be resilient and enabled us to deliver predictable result. For example, 85% of our adjusted PTC is from long-term contracted generation and utilities, and 88% is in US dollars, with the remaining 12% split between euros and various Latin American currencies. Similarly, we are largely insulated from macroeconomic headwinds such as rising inflation and interest rates. As shown on Slide 5, 83% of our revenue is from businesses that have indexation clauses or are hedged to limit the impact from inflation. At the same time, almost 90% of our interest rate exposure is fixed or hedged protecting us from the impact of rising interest rate.
Next, turning to Slide 6. In January, we completed a tender to acquire the publicly traded shares of AES Andes, bringing our ownership from 67% to 99% today. This was motivated by our conviction in the underlying strength of the business which is highly contracted, predominantly in US dollars, and transiting to low carbon generation. This transaction is immediately earning and cash flow accretive. Moving to slide 7, we now have a backlog of 9.2 gigawatt including the 5 gigawatts we signed in 2021. About three quarters of the 5 gigawatt is in the US with the vast majority signed with C&I customers and to grow the rate base at our AES Indiana Utility. We have secured supply arrangement for the bulk of our current backlog. In 2021, we successfully added 2.1 gigawatt to our portfolio without any material delays or cost overruns. This execution demonstrated the robust nature of our supply chain and the strength of our relationships with our suppliers. For example, we secured Samsung battery for many of our new energy storage facilities to alleviate some of the supply chain challenges faced by Fluence. Being able to switch to different battery suppliers shows the inherent flexibility of their Gen6 product. As we look towards our 2.3 gigawatts of new projects coming online in 2022, two-thirds of which is in the US, we do not expect any significant delays or supply chain disruptions. We remain confident in our ability to complete our projects under construction on time and on budget.
Moving to our second theme, investing for the future on Slide 8. Our actions today to ensure that we will be able to take full advantage of the unprecedented transformation of our sector. One clear example is the 5 gigawatts of new PPAs that we signed last year, an increase of 65% from 2020. For full-year '22, we expect to sign 4.5 gigawatts to 5.5 gigawatts of new renewables under long-term contracts. We are seeing strong demand for renewables, and so far this year we have already signed more than 600MW of new contracts. We expect our portfolio of operating renewable assets to more than double from approximately 13 gigawatts to 26 gigawatts by 2026. Despite any current headwinds for our sector such as delays in legislation and supply chain issues, we see very strong demand for low carbon energy especially for tailored products, such as our 24/7 renewable offering. That is why we have been investing in growing our pipeline of future projects to ensure that we are able to meet our customers' growing demand for AES services.
As you can see on Slide 9, we now have a development pipeline of 59 gigawatt which we believe is the second largest among US renewable developers. Our pipeline includes almost 10 gigawatts in the US that are ready to bid. This robust pipeline provides us with the projects we need to deliver on our backlog and to continue to build on our competitive position in the US. As a result, we're accelerating our goal of increasing the proportion of earnings coming from our US businesses to 50% by two years, from 2025 to 2023. We are also investing for the future by growing the rate base at our US utilities by 9% annually while delivering safe, reliable and affordable services to our customers.
As you can see on Slide 10 AES Indiana is executing on the approved plan to retire two coal units which we will replace with nearly 500MW of new renewable generation. We have already started our next integrated resource plan process which could include additional retirement or fuel conversion for the remaining 1 gigawatt of coal generation. At AES, Ohio, we're executing on our smart grid and transmission investment programs approved in 2021. AES Ohio is also in the midst of a distribution rate case and recently completed the hearing. AES Ohio's base distribution rate have been the lowest in the state for the past five years. In fact, as of the end of 2021, AES Ohio's rates were 16% lower than the next lowest utility in the state, and even with the requested rate increase would remain the lowest.
Turning to Slide 11, another way we're investing for the future is by developing and incubating new products and businesses platforms to AES Next. Our investment in AES Next help our core businesses be more innovative and competitive, and drive value for our customers and shareholders.
Turning to Slide 12, the most mature initiative under AES Next today is Fluence, the leading energy storage technology company. In 2021, Fluence completed their IPO with $1 billion in capital raise to invest in developing their products and supply chain as well as their digital platform. As of December 31, Fluence had 4.2 gigawatts of energy storage product deployed and contracted, and a signed backlog of $1.9 billion. Additionally Fluence's digital platform Fluence IQ now has 6 gigawatts contract of which more than 80% is with third party customers. Over the past several months, Fluence has been dealing with short-term challenges stemming from COVID 19 related supply chain issues. Their management team has taken proactive actions to address these challenges including diversifying battery suppliers, signing new shipping agreements, and building out their in-house supply chain team. Overall, demand for energy storage remains robust and Fluence is well positioned as a market leader. We see significant opportunity for them to continue to grow and remain confident that they will execute on their long-term plan which will deliver value to their shareholders. AES Next is also working to develop and incubate other technologies that help accelerate the deployment of renewable as shown on Slide 13. One example is our investment in 5B, which has a pre-fabricated solar solution called Maverick that is hurricane wind resistant and allows projects to be built in one-third of the time and on half as much land. This innovative product is currently being rolled out in Australia, Chile, the Dominican Republic,India Panama and the US.
Turning to Slide 14, we're one of a small number of companies in our sector with targets that are fully aligned with the Paris agreement according to the transition pathways initiative. We already have a goal to have net zero emissions from electricity by 2040. And as I mentioned earlier, we're excited to announce our intent to exit coal completely by the end of 2025 subject to receiving necessary approvals. We expect to achieve this objective through a combination of retirement, fuel conversions, and asset sales. In summary, we have consolidated our position as the leader of innovation in the industry and accelerated the decarbonization of our portfolio while delivering attractive returns to our shareholders. With that, I now turn the call over to our CFO, Steve Coughlin.
