Executive Vice President and Chief Financial Officer at AES
Thank you, Andres, and good morning, everyone. Today, I will discuss our third quarter results, 2022 parent capital allocation and 2022 guidance. Turning to our financial results for the quarter beginning on slide 10. I'm pleased to share that our third quarter results are very strong, and we now expect to be at or near the high end of our full year 2022 adjusted EPS guidance range of $1.55 to $1.65. Third quarter adjusted EPS was $0.63 versus $0.50 last year, driven primarily by our LNG business, as Andres discussed. In addition, we also benefited from an increased ownership in AES Andes as well as higher margins in Brazil. These positive contributions were partially offset by onetime charges at our U.S. utilities in Argentina businesses.
Relative to last year, we also had higher losses from our AES Next portfolio as financial results from Fluence were not reported in our Q3 numbers last year, higher parent interest stemming from higher debt balances as we increase investment in our subsidiaries and a higher adjusted tax rate due to a nonrecurring benefit in Q3 2021. I should also note that despite considerable macroeconomic volatility, we see very little impact on our financial performance. For example, the forecasted full year impact of foreign currency movements after tax is well under $0.01 of adjusted EPS due to our highly contrasted and largely dollarized business, along with our very active hedging program. In addition, nearly 80% of our debt is either fixed rate or hedged against interest rate exposure and approximately 82% of our revenue is protected by inflation index for hedging.
Turning to slide 11. Adjusted pretax contribution, or PTC, was $569 million for the quarter, a $141 million increase year-over-year due to the drivers I just discussed. I'll cover the performance of our strategic business units or SBUs in more detail over the next four slides, beginning on slide 12. In the U.S. and Utilities SBU, lower PTC was driven primarily recognition of onetime expenses at our U.S. utilities from previously deferred purchase fuel and energy costs. Including those related to an outage at our Eagle Valley plant from April 2021 to March 2022. We pursued and entered into a settlement for Eagle Valley and took a provision against a deferred fuel recovery asset at AES Ohio, which we will continue to pursue. These expenses impacted adjusted PTC by approximately $48 million in the third quarter. In addition, lower PTC was driven by lower availability in Puerto Rico.
Our legacy Southland units provided significant energy margin contribution again in the third quarter this year, although this was not a material year-over-year driver. We are also very pleased that in the third quarter, the California State Regulatory Authorities formally launched the process required to further extend our Southland legacy units beyond 2023. Higher PTC at our South America SBU was mostly driven by our increased ownership of AES Andes and higher margins at both AES Andes and Brazil, but partially offset by a provision in Argentina. Higher PTC at our Mexico, Central America and the Caribbean, or MCAC SBU primarily reflects our commercial team's outstanding effort to redirect our LNG supply from Panama to the international market as discussed earlier.
These LNG sales were enabled by the flexibility we built into our commercial structure and gas supply agreements along with favorable market conditions, which may be present going forward, although we expect to a more limited extent. Finally, in Eurasia, adjusted PTC was relatively flat year-over-year with an overall net benefit from higher power prices at our wind plant in Bulgaria. Now to slide 16. As a result of our overall strong performance year-to-date, along with the significant contribution from LNG sales, we now expect to come in at or near the high end of our full year 2022 adjusted EPS guidance range of $1.55 to $1.65. Growth in the year to go will be primarily driven by contributions from new businesses, including roughly 500 megawatts of projects under construction coming online as well as further accretion from our increased ownership of AES Andes.
We expect to recognize additional LNG sales in the fourth quarter, but the contribution will be much smaller than the benefit in Q3. We are also reaffirming our expected 7% to 9% annualized growth target through 2025, based primarily on our expected growth in renewables, energy storage and U.S. utilities. Turning to slide 17. As Andres highlighted, the Inflation Reduction Act extended and expanded the tax incentives available for U.S. renewables and energy storage. Tax credits have been an important part of the economic value creation of our U.S. renewables portfolio, and the IRA provides clarity on long-term eligibility for these credits. As U.S. renewables become a larger share of our portfolio, I want to briefly touch on the way these tax incentives contribute to our earnings and cash flow. Our U.S. wind projects are typically eligible for production tax credits over the first 10 years of operations.
Our solar and solar plus storage projects typically qualify for an investment tax credit generally recognized within the first two years, the project begins commercial operations. To ensure we take full advantage of the tax value of our U.S. renewables, we usually bring on partners that will invest in these projects to be allocated the majority of the associated tax attributes. These are called tax equity partnerships. It's important to recognize that as we monetize these tax credits, they create earnings and cash for AES. For full year 2022, we expect our projects to generate approximately $280 million to $310 million in new tax credits. After monetizing these credits through our tax equity partnerships, the earnings recognized by AES this year from new project commissionings will be approximately $200 million to $230 million, with the remaining earnings from tax credits to be largely recognized next year. Due to the late year seasonality of new project commissionings, approximately 2/3 of these earnings will occur in the fourth quarter.
This year, we expect to commission more projects in the fourth quarter than in 2021 which will benefit our earnings in the year-to-go period, improving the year-over-year comparison of adjusted PTC in our U.S. and Utilities SBU by the end of the year. Now to our 2022 parent capital allocation plan on slide 18. Sources reflect approximately $1.6 billion of total discretionary cash, including $900 million of parent free cash flow, $500 million of asset sales and $200 million of new parent debt. On the right-hand side, you can see our planned use of capital. We will return nearly $500 million to shareholders this year. This consists of our common share dividend, including the 5% increase announced last December and the coupon on the equity units. We plan to invest approximately $1.1 billion in our subsidiaries as we capitalize on attractive opportunities for growth.
About half of these investments are in renewables, which represent the largest portion of our growth. Nearly 1/4 of these investments are in our U.S. utilities to fund rate base growth with a continued focus on grid and fleet modernization. In summary, nearly 3/4 of our investments this year are going to grow AES' renewables businesses in our U.S. utilities, reflecting our commitment to continue executing on our portfolio transformation. In addition, approximately 70% of our planned future investments are targeted for our U.S. subsidiaries, which will contribute to our goal of more than 50% of our earnings coming from the U.S. in 2023. I look forward to AES continuing our strong performance this year and sharing updates with you on our fourth quarter call.
With that, I'll turn the call back over to Andres.