AES - Earnings call transcript Q2 2018

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Operator

Good morning, and welcome to the AES Corporation's, Second Quarter 2018 Financial Review Conference Call. All participants will be in listen-only mode. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Ahmed Pasha, Vice President of Investor Relations. ahead. go Please

Ahmed Pasha

Good XXXX Andrew. welcome AES' to Thank Review morning Call. Quarter Financial Second you, and

Our presentation will SEC to our many differ website of statements press materially available discussion the filings factors at are release, during factors. statements. future these www.aes.com. for and that related from may a Today results There these our we call. be cause forward-looking information making are financial to on refer Please

Chief are members to Andrés now Tom Gluski, team. Joining Executive me and Officer; senior Officer; call Andrés. our President other With this of Financial Chief over morning turn the will O'Flynn, our management Andrés. that, and I our

Andrés Gluski

Good you quarter joining morning financial second and our for thank review everyone XXXX call.

puts half the half the $X.XX Second quarter us the earned adjusted at of higher than which earnings first is $X.XX XX% we XXXX. first in $X.XX for of per XXXX, of share

our Tom more and I’m momentum We to guidance that the last longer will of in results XXXX our positive the expectations. hit quarter term detail to discuss report continues. track on pleased remain shortly. will

achieved quarter a of improving our milestones we risk returns. profile the During towards and shareholder number

Specifically, by Moody's we notch Fitch now recently were and agencies. one our by below rated and just all grade ratings are investment three credit upgraded

end. in renewable growth We nearly two projects XXX U.S., inaugurating we We million Colon capacity terminal in Plant commission our expect between in approved, signed be we in and rate brings X.X and investments. DPL program. and Year-to-date addition, and brought X.X to We our Indiana X.X currently Eagle million Brazil, We year construction, will supported to settled will be as X Of We're in the on have gigawatts settlements expect both in gigawatts XXXX achieve in XXXX including remaining Combined the later and CCGT future XXXX. progress pipeline. we investment from to the IPL which sale At track regulatory reducing these Gas Cycle of result Eletropaulo of grade statements. position advancing made restructuring and $XXX LNG our widely for under $XXX significant deliver month. utilities to online by savings PPAs, of in gigawatts our in cases. megawatt this in Panama simplifying ratings metrics by our construction our backlog utilities gigawatts. now under Valley the XXX megawatt April regasification of sustainable net and the our interest cost proceeds transformation received a financial risk Once we

to new Lastly, we energy including leader applying be storage. continue a in technologies

is battery first Central half with XX projects, slides shipment slide which I'm the megawatt we of XXXX. based on will five. pleased slide on new some report last the Plant the progress these regasification few of I nearly Our projects on Siemens, American accepted following one in made online Since first its in come on to megawatts Of settlement rate call under our Panama significant it three now a the to to currently achievements Cycle more highlight gigawatts XX world. JV on history. in in countries and starting these our four. of and Fluence that the Combined have that has terminal XXX complete X.X LNG with tied I will bringing of IPL’s are construction, expected projects included beginning rate case in provide total storage details

plant The expected potential tera The storage as is the Btus Dominican returns. COD project will to and complete to cycle on-time XXXX. XX September, achieve dollar the Republic. completed represents over entry in on-budget. be provide Construction combined capacity long the region. in U.S. tank of expect LNG in uncontracted term storage power upside Approximately XX expect U.S. gas is is American Central the of will We as low it has natural denominated and the and cost of transform energy and time increases much predictable in of nearly that sector, we use the

XXXX. to gigawatt, turning with XX% as which Combined Construction Southland Cycle of operational the redevelopment to Now Plant, complete our by project our be California. is track facilities in proceeding half now on is existing gas first and X.X planned, a Southern of the

storage in Kaua'i. of a megawatts of and solar-plus the duration total storage Island solar five facilities on we're Next for XX Hawaii, energy delivering XX of two of megawatts hour

projects pioneering satisfy these will as well the of of rest during first peak construction under demand day. energy and is The the hours, as

The second year. Once expected are both later largest they to is solar-plus for installation world. this in the will projects these represent the begin construction storage of the U.S. completed, Navy

we by OPGC Finally, we're good Construction our XX% and gigawatt India. at in X on making X.X expect budget. to online Thermal plant now of the this the as progress year planned. come complete The Plant project is advancing end is

has of successfully and tunneling progress performing has you restructuring, work Alto with may Since in Gener construction revised contract the late. EPC the been the in now in improved meeting the the AES As XX% complete, on line tunneling recall, May. contractor Chile the main project XX% hydroelectric Alto milestones. Maipo closing restructured of Strabag is and as including agreed of significantly is Maipo upon the rate

We expect in to Alto XXXX. operations Maipo achieve commercial

Our remaining contributors will as flow to cash These are renewable and are planned for be XXXX. proceeding construction projects growth key projects and earnings our energy.

Now XX. slide turning to

our risks, We have portfolio attractive reducing shareholders, deliver reshaping returns lowering been our footprint. to to our carbon while including

renewable increasing portfolio produce We're and global equity to basis, our platforms, contracts. mid-teens returns financing. attractive on investments to IRRs by utilizing with cost conservative denominated lower On non-recourse partners is are existing earning dollar terminal natural capital average U.S. on our a gas long of term low our focus projected scale, on and projects the investments Our values. share assuming

to better earn returns America than in the Latin average. projects our expect portfolio We

XX.X PPA's PPAs of of for as be would of XXXX. X through of as gigawatts This expect of C&I we long has for term additional signed of gigawatts with year slide PPAs of worthy annually assign Year-to-date, gigawatts and result annually non-recourse Apple backlog, gigawatts the well be see includes assigned as is new this such credit than to Microsoft equity. renewable XXXX. XXXX, for sPower signed XXXX. all gigawatts of would being sign by achieve through XXXX. our PPA's long Most so well that projects on can construction, shown partner large This pace customers financing expect utilities. new gigawatts This for on renewable needed projects year, double term X.X through under signed In X light plus projects projection XXXX PPAs As our we full for capacity our this To expected and we exceed progress these to X X are X.X to as capital by now PPAs online XXXX. which you to of XXX we sPower we the last as more expect on new funded slide as far X.X to and to megawatts which X.X PPAs in X year. gigawatts and XX, as referred year when add XX, internal gigawatts acquired to we gigawatts will of we the summarize,

our generated allocation requirements Tom our discuss funded for plan these shortly. be equity projects through Our internally cash. will from will XXXX capital

noted, is As earn had portfolio. returns our attractive our I greening goal to while

The XXXX. expected goal carbon contract capacity to years the construction As by of additions. eight gigawatts XX% us and see up reducing remainder our will is which through slide of come under intensity life XX%. all to of growth a by This you our of XX.X extend is can our XX, new and XX significantly XXXX make conventional online generation, achieve renewables help average years from currently currently

and for some of by grow also we existing color of calls. provide emphasize future approach current PPAs, We We our sake and energy. megawatts. do I extended to extend blending not would simply are more and enhancing on will that working green to the this plan contracts renewable call blend adding like adding we by on

will adjusted attractive We in projects earn new risk can and invest only we if if returns.

applying be as backlog venture delivered megawatts. storage, to more discuss XXX with once call capacity over XX based, in capacity will megawatts Siemens, our XX total of guidance With the XX we battery their energy with joint has our installed. when and allocation now that, to countries signed financial have is and to a Fluence, XXX eight technologies Fluence I'll detail. total Finally deliveries last of results, delivered Tom existing megawatt capital in to Total call megawatt. leader a continue slide such turning XX, our additional since a projects new contracts of in exceed turn

Tom O'Flynn

allocation. Andrés. cover second credit and Thank profile Good I'll results, morning. quarter our improving capital

our $X.XX earned towards guidance continue year We to progress to year-to-date. full adjusted good EPS $X.XX $X.XX make with of

on $X.XX Philippines As was slide was Kazakhstan. shown the MCAC, sales the of South XX, as quarter, down second contributions debt Offsetting coal and well reflecting our high in in pay parent. as America this from and EPS at plants the the

Our I’ll and U.S. prior quarterly rate expect we year beginning operations a a due continue timing of next quarter as, rate four results Utilities the generally a which million, the slide a last million. the with results of timing XX% PTC in over outage to XX, full range. year PTC this of In first quarter to issue the $XXX Onto were an down also tax ‘XX. in versus adjusted in in our Hawaii in reflect year. occurred the XX% year. quarter on XX% detail second tax $XX $X.XX the more was line a to part increase was slides slide the from during of is which cover planned

to outperformed $XXX improved good original Republic a acquisition, has $XXX expense business the an of by the and also the at Cycle just quarter largely to to a year, million million as acquired in interest has and access results Regarding higher sPower having XX year and PTC, AES as Since capital development the as well Columbia, life sPower Gener parent in Chile. America roughly completion MCAC to well a both or contract markets, due PTC since continues In our coupon. from average South refinancing closed improved contracted operational in of quarter perspective. higher a have lower Dominican pricing sales reflect investment. with the to the business our as expectations cash we was last distributed our X% Back it, second higher availability. about portfolio in Combined The driven

$X.XX Philippines Finally the full results year-to-date adjusted in business EPS which of on year XX, the Kazakhstan. achieved and to slide at reflect $X.XX, our sale Eurasia, increased XXXX. our midpoint Shifting the XX% in guidance results represents of primarily to our our year-to-date XX% versus

rates asset regulated were lower and of DPL. higher offset Our and parent debt. maintenance up contracted Chile, from results and in from higher were also reflect including sales benefit partially America we by impacts and the These contributions U.S. Eurasia. Utilities, sales in In South expenses lower Colombia Argentina

Turning beginning to investment in we grade. At the profile and quarter established debt X.Xx. our in we a on slide goal XXXX of leverage billion that parent reaching $X time improving of XX, had credit third of

We expect debt $X.X year in leverage this billion with end and to X.Xx.

of investment Xx metrics XXXX. Our grade goal is to achieve by below

shown on commitment are recognizing actions. slide As rating the XX, agencies and our

three third Fitch one quarter by investment BB. and recent below notch we all rated BB+ just XXXX, are BB- Moody's upgrades rated of and Today As we grade. after by agencies

and reduce our grade to to will also not our cost obtaining financial equity improve that rating flexibility, valuation. our investment continue believe help We debt but only of enhance us

cash, capital Now our of million is prior side, to $XXX which reflect to including free allocations parent with hand total left cash $X.X on slide the sources in disclosure. billion line current $XXX discretionary XX, on million Beginning of available XXXX flow.

reflect asset Eletropaulo from $X.X in Philippines billion sale the also net in Masinloc in proceeds Brazil. Sources and

for the parent side We on $XXX We've leaving Including drawings. to million projects of we’ll dividend cash. in debt, in unallocated announced we subsidiaries, used December, increase our X.X% invest revolver over to to this be billion hand $XX of returning under Now shareholders to including about uses right the million primarily million slide. reduce construction, year. plan $XXX $X the

our in XX, achieved XXXX from expected continue parent we from which comes to to moving is $X.X cash, generated asset sales our on discretionary market cash half Finally have billion capital The to which target, XXXX roughly to-date. cash expect allocation our free half beginning portfolio our be discretionary slide generate current billion $X.X of rest is to But flow. from our $X billion we to cap.

additions, Earlier this Andrés Turning slide coming XX% to current XX, gigawatts of two-thirds online been cash uses and for XXXX. laid delevering. XX.X discretionary allocated which dividend in of out towards has roughly on is

bring financing. are Our we partners equity needs for use this and as non-recourse in capacity manageable

Specifically we're This investments PPAs and more expectations in than million our coming through equity only our to backlog our million for our call. fund last $XX planning XXXX. project is $XXX online on

we all these unallocated million and $XXX equity XXXX dividend our $XXX which quarter our weighted showing projected completed, The additional to projects XXXX. value, contribute of through to investments create also cash investments available PPAs and XXXX This to largely beyond. Once in on million growth XXXX line subsidiaries coming for including is are in is and shareholder growth. remaining in will

annualized rate and last the over growth XX% dividend X% As last you four. three is know, the years our over

Board our turn We the dividend December. remain to I'll dividend we growth back continue important annually in Andrés. of to with value plan review our part proposition. to don't such it expect we that, growing an Although, rate, at exceptional dividend With an our

Andrés Gluski

Thanks Tom.

summarize Before let call. we take your me today's questions,

puts year-to-date XXXX track performance to achieve us our Our guidance. on

achieve are in positioned to XXXX. metrics We credit investment well grade

long gigawatt us enable profitable objectives contracted portfolio. Our growth the X.X projects achieve backlog of our of greening to term will and key

We will ready take framework we parent adjusted confident XXXX. capital we deliver consistent which in substantial in deploy our ability XXXX and X% questions. our amounts free through to of XX% to discretionary cash remain our to generate expect on through annual are cash your flow and XXXX, EPS to average Operator, we growth from allocation with

Operator

[Operator We session. begin question-and-answer now will the Instructions].

ahead. comes SunTrust. first go Ali The of question from Agha Please

Ali Agha

Thank you, good morning.

Andrés Gluski

Good Ali. morning

Ali Agha

your didn't remarks. first morning. on Good you this bring up question, My

you out give to to on update question how Maritza an earnings we Does impact think contract first ’XX. it that's something If growth I model the what eventually, things that about in to or on said think my factored we with it change Is could scenarios to either thinking you should in? the ‘XX and where How eventually, should us change Maritza does Bulgaria, more the with that you’ve and point when different with X% of stand as play restructuring. I that that And out you've question? be there laid of a us is, that that, profile XX% way? expecting could any my buyout through sort before, already be

Andrés Gluski

we aren't well yet government. in with formal Sure, any negotiations the

the sometime sides aid. but you in As hasn't European I’ve said regarding in illegal raised negotiations as state begin the been Commission was past, the to declared an with expected such, It future. both are issue know

the said, an uptick paid I’ve We're to a very we As country; have contract. continues strong growing or grade investment being on of our time. and is NEK it's situation improve. Bulgaria

future. is terms really And a I you this know when and you you Bulgaria, early to this in this our know, have contract The so defend of we come we affect it's will very will of keep say as know would interests. will how So in of said out. our plant needed too we sort good informed you

contingencies outcomes in a where we have There satisfactory out. numbers outcome. and arbitration are possibility. of this turns have to a we Obviously see our have a You range do is know don’t and we

really as happening. So will on tuned. much stay prior we to sort the have be of information don't There call. report it’s more than more did We

Ali Agha

Okay.

Second and laid new some backlog online beyond projects, question, that etcetera. will you the XXXX likely XXXX, out XXXX, come PPAs of

your what XX sight? XXXX? give your line you factoring visibility us the the start sense of like of profile how is I going in, that that look sense Can would you XXXX you for projects out growth as us beyond you growth forward. Do sustainable laid beyond through profile some in have is context, to a rate of wanted and get So for these

Andrés Gluski

will our we – update on after fourth call. Ali, on you quarter that are Well

the showing pipeline I think to a here we of do and of to as growth we is renewable continue what robust we continue. have scale pipeline advantages competitive that expect this that develop I of projects, of combinations as are very and technology, pipeline to

you would really inaugurating other grow specific I we regasification but can't it's have we eastern megawatts, I XX only we just Dominican we add the days officially in I we we that not that the growth. of that projects So many making that should besides within passes, attractive the time think number, how LNG such and have returns Panama, pipeline, the you're that robustness seeing but that I depend know sure and the that terminal have the on know as on as fast you have think you be will gas pipeline opportunities give Republic. in any also the

to businesses addition So which in growing some we the have megawatts. just are

Ali Agha

question, Last near term. more

up impact fact half. generated in should down overall timing first the that been that tax the in own to that in reported at quarter have full and of the at your more have XX% adjusted though first half? the come when the looked come the you the through But half, context a year-over-year, does earnings said look second rate you through, issue how You the earnings it’s compare year you alluded to that of we the has that if internal the budget

Andrés Gluski

I can as the bit our said, on lumpy track know us, sometimes Tom a hit think rates on and depends from where earnings numbers specifically. to it mean because you Well, for I little came we're be and tax I

a know we the sort – So and we really of read much rate I really quarter year. for wouldn't planned tax a too into one you

Tom O’Flynn

its for will fourth third shape We have historically our out same. and Ali quarter strong us. pointed that to earnings and tend Tom. the Yeah, last We year are quarter

started consistent So we the where year. is with this

Ali Agha

Okay. Thank you.

Operator

from question Please ahead. Macquarie. go Storozynski next The of Angie comes

Angie Storozynski

Thank you.

get the XXX you megawatt per I when So there going would the growth I think back at of was that sPower, growth about year. assumption acquired to remember be that the business,

keeping projections Why towards earnings, positive isn’t growth a yet earnings the there exceeding upside significantly seems XXXX is you through you beyond are more and Now are Is it to unchanged your you rate, just XXXX. providing rate because your is till that? that growth it growth XXXX. hence and know

Tom O’Flynn

sort you mentions. our I growth I some Well, thinking think, know rate, of would make of

is sPower obviously it’s contributor. one know big You a

We smaller, wide XX% Overall have very are renewables less, very U.S., is robust big is XX% to energy about more doing is wind it’s a of XX% also distributed also contributor our growth we well so but XX% our outside, this. portfolio. it's solar, is business, a in

that you our I comfortable you we’re things talk to year with XX% on, is portfolio, as number think X% about So we again, But and feel growth. of mentioned, XXXX have we going there – you a of term feel know projections. hitting know longer about know we’ll so guidance we for uncomfortable our our this numbers you to a

Angie Storozynski

your that you now cash we internally the some share with a generated renewables. of about mentioned assets. but stories flows, divesting thing Could talk you all I'm that? of financed would seem you Okay, operating be incremental potentially about contracted the talking about the growth

Tom O’Flynn

have Yeah inbounds some sPower Angie, some it’s closing of did get Tom. that after past Yeah, on assets. we in mentioned the we, operating piece buying we

income. self-operating in to as sell But is, the we things about see of margin their we’ll if conjunction side it pieces and of those incremental we our would end to owner-operator-manager, like keep that's million That growth are that’s Obviously driving see adding We'll are front be so an continue By something as that that the is sale We and if those to probably the operator, into want piece, versus be billion, think a partial which the about of $XXX did the some assets. that, $X to downs really which development operating value continue upside. asset go. business, opportunities opportunity. be would forward our X.X the fit of the continue partner side, the to on XX% they is year in facilities, also they’ll solar, now. adding with

Andrés Gluski

our for in Yeah cost by we capital to will bringing lower NGOs, context be in on put this know, equity, leverage so to you opportunity partners. looking

and development in capital, So us, you assets, equity and higher operating will different can into up then sell for putting and example operation do. plants that's then down our use be once a they that we we returns us to if know whether what partial get are that towards cost lower allows then

some we've higher the over a return assets, lot years and know reinvesting say you capital last raised projects. quite selling So in that of let's by capital of

strategy, So this that. know is our expect so more of you right on

Angie Storozynski

during twice provided. XXXX And know your updates this actually with you you’ve that fourth year's had providing to forward will call didn't roll earnings on said quarter as you you lastly, fourth I XXXX on the But only be us growth already quarter beyond historically this call.

we contract this your off us clash. concern investors are have You earnings a rolling and that know potential providing about among and you

you XXXX you at a directionally currently? on could least So year an sense XXXX us see if give versus apt would be what based

Andrés Gluski

You we I in that assets cliffs XXXX. have we as coming lot have know, see XXXX, of online a actually any don't when really in

know assets you the that's say of online online these megawatt the that would storage just all includes I energy coming should be So like momentum, that things Southland. XXX you when hours XXXX because year, know good storage, and in will a know energy you be

you contracts. In Gener of cliff, AES we the we have half in of contracts know that's off – falling only at and the – only XXXX terms really

so we XXXX. cliff in know know pretty fully see through XXXX, So contracted a is don't much Gener you

Angie Storozynski

Okay, thank you.

Andrés Gluski

you. Thank

Operator

The Lynch. America go Merrill next question Please comes Bank from Julien ahead. of Dumoulin-Smith of

Julien Dumoulin-Smith

morning. good Hey,

Andrés Gluski

Good morning Julien.

Julien Dumoulin-Smith

that I for follow make intend we're wanted investments you this. you for bit make to clear on renewable on questioning. bit to little Hey, Angie’s you thank about a Can in just the equity up to direction the the little segment a time. elaborate sure

profile cadence lower sellers. that’s $X.XX given to or of to on I of put accretion investment project about think that that that of in to basically based equal that going contracted $X.XX little historically off returns that a low say bit these than to think a (NYSE:B) earnings mid-teens return kinds investment. is the capital, it of you're you Is perhaps heard just ‘XX that about maybe the and we for (NYSE:A) that instance to in I maybe $XXX million Is here. good specific say

Tom O’Flynn

Hey Julien, it’s Tom.

million this projected that's my XX, the of had XXXX slide structure, say location could COD amount for to ‘XX million, roughly $XXX in $XXX invested capital partnership on obviously also projects. it of depends upon projects that and in of we be but half So – the go ’XX; things is COD projects,

in just layers, of probably history, about terms XXX year, cadence our $XXX investments equity things to nature markets. $XXX so going the you back consistent. in per investment lumpy projects. would the It's about in I a or our about more which if XXX is and of other in you this and key the be in Colon obviously renewables, last to cadence if think generally Obviously total in and at million U.S. very year XXX our think maybe smaller about like been probably less in more So least things something renewables look at that, like million, that five years, that’s

internationally of terms where digits double and see seeing depending mid-teens. think we're we are, returns, low in generally upon I we low U.S. the In to

be to we So and along factor updates guidance beyond. XXXX those as we into expect move our that accretive for and we would

Julien Dumoulin-Smith

just clear about clear. little Let me be a this,

the in earnings is, contribution to So nickel XXX, ROE to that so. to the year? about that, of double a teens year say should ROE what of mid-point you an the XXX; get on is low a kind say XXX the digits. a is sense put say cadence say that or basically Is or know for take that and IRR thought low we you're in a XXX saying XXX process i.e., current an

Tom O’Flynn

I Those are cadence, and use for fair to are I’d use if those for was ROE’s going reasonable and probably XXX ROE’s. XXX to the

of are depends Some bit them on it region. a the – little

sloped. and ROE are a some those a term ROE’s. pretty those are as are more near little IR’s them more of in Some portfolio little beneficial a reflected But

Julien Dumoulin-Smith

this does this distinguished, with make How Got about total is renewables global further about we're And investment slide XX be talked it. this on that and thinking compare, you – equity counting sure to clear of double here a and not just to separately? and about XXX.

Ali Agha

slide which again? I’m sorry,

Julien Dumoulin-Smith

about talks global renewables. equity XX investment a contributions separate Slide That's than for bucket the…

Ali Agha

are the these projects So in construction.

an mentioned you $XXX annual think I of So million as about forward. investments equity so million are we talking on $XXX Tom to known moving basis

Julien Dumoulin-Smith

of the different that, then million and $XXX million a is [Cross got you've invested, XXX… now $XXX slightly cut right but right? this This to is actively million Talk] $XXX

Andrés Gluski

… of started They not Microsoft-Apple start X.X most all construction numbers next the so and those big shortly Cash will have construction. project power our like and are will AC they’ve signed it's projects right. Virginia year-to-date, quarter, so yet not

Julien Dumoulin-Smith

a XXX of total the So is equity. small factor

Andrés Gluski

a it yeah, because small construction. that's it’s gone stuff already It’s piece NPP, has the already just

Julien Dumoulin-Smith

themselves mean And MO one for I the to the of if list The space, sort of source as basically of another I where opportunity? there clarify. sorry, just I thus to from far. we power just of solar, sort were success But contacts. you in this are mean the orienting projects know define have a store you is principally [inaudible]

Tom O’Flynn

shift, the is is about we They are the towards XX-XX are are making solar. they client They XX very and focused. they about When acquisition, business on solar. I’d say probably shifting. solar, – at wind XX% XX% XX% were wind, now probably right were but shifting they on sPower new right closed

as So with great business those are large like to other and and obviously that. know such so of utility clients, Microsoft folks a Apple do players you some do we’d We additional clients California. CCA's transactions look type some couple and do in utility like other still

opportunities doing Hawaii. lot projects to solar is of a that business Massachusetts. state in they are program and we on the that the a EP Hawaii tends right a build more for program project, at program, smaller Our focused, two state then in look as DE now storage so be Andrés mentioned, business

focused. be regional more can they So

Andrés Gluski

outside that mainly C&I grade, forget U.S. customers, don't contract, know term dollar Julien and the this contracts. and were Yeah, XX% long of you they dollar investment is

bring down, sell we extent know you a that improves returns. things, our it’s also that equity or can and the to in So of again partner mix

Julien Dumoulin-Smith

Great, excellent! Thank you very much.

Andrés Gluski

Julien. you, Thank

Operator

The questions Please next ahead. JP comes from Turnure Morgan. of go Christopher

Christopher Turnure

was mentioned be new contracts. continue more talking you an hoping but you we hopeful be might Great, guess Andrés us for when or on briefly The types good update customers I I Dominican and your in prepared might of Panama existing either the LNG have duration that morning. there to Republic color give remarks to, you you could their? projects,

Andrés Gluski

Okay. we've Well, replicating Dominican doing all that is know Republic. in in successfully I think the we're done of what Panama what first you

at the to have of selling industrials Republic LNG Dominican very in and facility. So business nice the we transportation our

we into those project So the already. capabilities have built Panama

Now some market the Panama will it for develop. take Central American time to

our for create strategic for diesel they oil competing you clients, gas to gas know of sign have long offset with clients competing or example, contract. alliance market up risks from products the two and ENGIE fuel to – term for with having of with that can for some a heavy Now we are these facilities

Panama of There is tera will in used the area our what be converted gas Btus and saying XX the plant by could that some we the coming be plant, are plants are online. basically the So construction would require more in pipelines.

We of well. capable plant are discharging as from fully you the that from LNG again, know

So to as in the to Dominican time some take develop that’s that’s has going a it market Republic.

XX Republic tera Eastern of building pipeline Dominican have significant very about gas in offtakers Btus Now, a that's and the the Barrick. we the the growth with

for its its converting basically you generation mines for area. transportation in So and again, those offtakers gas. potential investment-grade, also to There mines is at know that it's

fuel gas converted. that be transportation and eastern that of is potential heavy other built, there a lot diesel and once plants So plants could pipelines is

case successful America. business the a it Republic in So from it’s replicating Dominican taking Central

deliver it market we attractive, into Honduras. use also but countries, as you know could as very other a So is American to such Central hub gas the Panamanian

Christopher Turnure

I percentage is how Republic now? it total me, guess capacity? in Okay, capacity Is the of great. Dominican remind a And much then the any just left right if

Andrés Gluski

I to go, in would Btus, But Dominican XX tera Republic have about that’s this world Btus that XX tank, XX we tera tera another so be say probably XX. because a the would

it we how can So an fill gives idea it of up.

we tolling it's without taking again, projects. attractive commodity and do which on very Now to is these do any risk what

past potential longer we term have large in project Vietnam. know a the similar we You have mentioned in very

a project. sort that would more of be So XXXX

Christopher Turnure

pay and Chilean made to to decision the there. anything here? off assets give then and more assets sell those time could Okay, Kind about gears, down appropriate switching the debt of specific on you that color us sell your transmission

Andrés Gluski

AES peaking and for and you know Well and proceeds it so we transmission attractive it’s solid those restructuring down debt. it’s you sort program is doing asset, pay used a know to gas assets a sold of its prices, plant Gener think of the

you non-core know so that similar. we So assets valuable funds and AES taken it’s has company, others and used and very to are similar, delver those what assets think to and the of in the more let’s sold say terms we’ve it’s done

Christopher Turnure

Okay. Thanks Andrés. Makes sense.

Operator

Steve Fleishman Please ahead. from Research. The next Wolf go of comes question

Steve Fleishman

to Yeah, good questions; the any manage of A are couple first you from morning. trade issues. risks needing quick war tariff

Andrés Gluski

Okay, you’re on tariffs solar talking about panels? the

Steve Fleishman

And more broadly.

Tom O’Flynn

much all. we're More quite broadly could you the affected at Remember of has long a frankly in not contract if year one been biggest would first mention broadly. strategy sort -- private term more negotiations sector. And to Mexico. dollars no I say that NAFTA with our

directly. markets our in any effect So you of we're really seeing any know not

and energy If you're sPower distributed ‘XX both know talking panels U. attractive for in S., solar and on about ’XX. contract sufficient on the have and our terms you panels

quite some such we're bigger positioned and of frankly us. the uncertainty players think So favor well the I as

Steve Fleishman

kind like your then of accelerated to for and XXXX, good, investment already embedded X% that’s XX% the growth of terms so – is just correct. renewables sounds it Okay, rate in in

Andrés Gluski

correct. That’s

Steve Fleishman

than clear be to are a a and you range? number kind same before to it’s agree growth. the additive the maybe Okay, still you less could what the that’s of that on be little bit you Could within areas or little and higher more

Andrés Gluski

our Well, But our theme our really assets, we’ve you some strategy been know portfolio. say the on down Remember give you think be about of I have we’re and so know here I would doing also greening we’ll this is overall as take. way basically I is derisking. you range. the arching again selling this, within think the

projects know we're but very construction and you small in stay because have than dollar contingency large we know derisking our individual longer contracts, term updated, is are know more a this more obviously so and projects going towards a numbers basically more you So in contracts, risks, rather less positive you they news.

we’ll if IRA XX% XX returns average to to had in continue chart we U.S. that up the the make you increased think there. notice, on put progress think you a we up the and and know we for renewables I

think it and So you continues past know company. about and and very the portfolio to be then overall know is with in I portfolio know you is our way line think the investment to the less in news good the risky it’s grade you an

Steve Fleishman

maybe kind as just said I – the more true? is far newer just done the to you color from is process than sPower can operationally. assume maybe on so then I little better it’s a give expected, still of think financially you you and that well, Okay, relatively lastly, company, since

Andrés Gluski

values answer prospects. Yeah, is growth mean terminal mean the on our conservative quite we I I yes. on our are again

earnings we've you when our PPAs call we XXX about signed were recall, obviously on megawatts year done talking of we of So it, if and bought better.

time our ways that. hitting to at criteria you know know finding the we improve You same return were and

So good a I it’s overall would say start

Steve Fleishman

more, expansion just that… Is you initially seeing your returns Any of expected. is are opportunities because growth you the a at more lot than

Andrés Gluski

better phrase I be Well, conservative. might Steve think that a way were we to it

so we were But know a were we very were for know know talking what and other about, what on the know and that’s we you we're with is you You this. hand saying pleased you hoping it. PXX conservative

anticipated business. are bought probably unit. had energy we that we You with very the when we know know pleased distributed four you doing to times our It’s originally business also three

calculate conservative we this know, very also in returns. our you values about we’re conservative been and So likewise we've terminal generally being when

Steve Fleishman

the last booked when and PPC's IPCs and earnings for just way one then question, assume projects layout then about I the in you did startup And the upon address the of segments? you two just XX the on thinking the U.S. solar year,

Andrés Gluski

tax we – generally not Steve, are Yeah we are equity. using

does tax of equity come for buy the via a expect for PPC years to and couple through equity earnings in use initial years, solar. to continue We dos equity tax our to earnings the help couple an then from but next tax ITC standpoint

Steve Fleishman

you. Thank

Operator

Johong comes next of Lasan The questions ahead. Auvila Research Consulting. go Please

Lasan Johong

very Great off project going that a business on into that a to you. guys I questions clarity, thank more the is (A) a – Dominican I you so the deeply delve I you or it, be pipeline much. call. one basis. more is Republic, want is a few in one Thank got this broader to Andrés, But something appreciate that love

Andrés Gluski

the We Dominican had one going pipeline Republic, from in facility. Andres to out DTP

to there So us a.... market, this would where only within east getting know not it’s you a the Domingo, it's be Santo is going to larger because

Lasan Johong

pipeline understand a but understand going particular forward off project. going be or I another I on on interrupting. vehicle for going for that, but to investment basis apologize that, depending I need this No, be one is – to is a the

Andrés Gluski

Panama say for Basically mile we're a in you if but pipeline the the into XX I would say I to getting needed then a like within a there's very pipeline maybe we demand, specific it, radius, know will tied build much business. example mean a is it’s not couple will to facility. we plants

and value not we're our to storage pipelines that realize helping sort of value, going has. separate the So the build reclassification aren't a us know you that

business that. to linked We're very be the will it otherwise. into So pipeline getting not

Lasan Johong

handcuffs On will of kind past investment Great! of kind lot grade were rating, if frees grade a rating, that up issues transactions. you of the it change you in investment once

businesses or the possible and some DPL levels that limited structural are grade insure in rating. the So to something you make at level, the would that to point the not bring there IPL at up be parent example are reductions to is level. changes parent it example the investment at any for interest that could with Say other the expense current changes for like

Tom O’Flynn

change our I it Yeah, nonrecourse entity. Tom our of standalone, don’t having think be we’ll basic subsidiaries, it’s philosophy

the to investment most in recently countries. has grade DPL rated As entities you structures become grade. of are investment going event know investment those grade grade investment or of not

with So valuation, think change, the changes we would change it’s feel we like investment that we I from and quite comfortable our things flexibility our [inaudible] are shift but we to to – think do general cannot from will don’t primarily not would help tax today is of not for – a we of the demonstration best we’ll when going part in us that us I said equity able this it we change. But support US help on you as lot the a think grade and I structural and focused will financial help feel profile. don’t stand perspective. approving do. the There to – today,

Lasan Johong

you able be not down Well debt. some point pay be to cash going are use Tom, the are as the flows at to overwhelming, to kind of money

kind flow of that the the term plans what’s massive excessive coming? So longer for cash

Andrés Gluski

keep of been have wait our and a deal you very assets, the think capital really to that assets had we and and of good was think use that forward. get was sale we’ll and I to non-core we’ll part right of able I right we’ll But timing financial number know until we've is the Tom framework updated the think going do see. to allocation I what saying, of you again, flexibility

us grade more and robust I greater investment becoming make will So give flexibility in markets. financial is even for us think any capital changes

Lasan Johong

next enough debt not do There’s three or debt. in money going hopefully for years? you to the Well, cash next flow the four plans going use be so are down, this to what’s you but at with all coming that pay that – Yeah, down pay to what to the can’t excess in left you cash?

Andrés Gluski

updated you when that keep We’ll happens.

Lasan Johong

has kind just I incredible AES now, of gone conventional Is more you talking and look renewables in about? question, since you transformation last the understanding an because through the amount of following Are What of a AES and pretty I’ve XXXX. on I idea years? but have from since are been kind Okay, today's towards guys. more you generation. straight of five where get like it you call, laying good shifting that of guys want of to back does XXXX. picture

Andrés Gluski

part quite risk is. and portfolio. definitely is of reduction risk where greening Well the of as know, reducing that our said that’s in we're the I frankly part demand also some That's you program. markets think We

You know if to want towards heavily you new U.S. in and renewables. market get the weighted PPAs its

but are the we you they us not think Now renewables do that existing conventional an capacity. energy, are advantage, a know because really do having see assets transition. gives We

actually sell have to to lot to can billions in you a the that is of your So but invested. that's be talking in in And can battery about of [inaudible] you combined hundreds you're very it use coal put plant, you interesting the existing and with batteries, capacity cost capacity the some because we're globally two the a great you has example ways renewables can get plant would dollars transition of of either of or some and blend gas the for or plants. coal know low combination extent energy green markets is of which hydro, from seeing of be gas possibilities,

leading hope markets. next So, years? that whether you as of leading many in the to we’ll think leader with Well, to combining a well. five it what be in continue quite We the be I the We’ll in or the market solar transition frankly do combining technologies, know be solar be as well. conventional storage new

Lasan Johong

the Colon said from like you add that would lot. projects. say know Thanks and just exporting gas to Cambodia In difficult Thailand? potential into mean look question. Vietnam you the it’s I'd to Vietnam to that Does more a you of replicate also one type

Andrés Gluski

mean so I a length, facility with several would that there be be – trenches cycle are that. plants case of it mostly big be that combined gas and very it’ll total would In go this

I know exists. this think So that that you you possibility yeah stage the know at

be and You their signed it policy is at Vietnam would have that know with Petro point. really have a MOU we what to

That said. XXXX be that’s ways I a as project. So off would more like

Lasan Johong

Thank you. Great call!

Andrés Gluski

Thank you.

Operator

question-and-answer like over closing to any This remarks. turn I back session. would our the to Pasha concludes Ahmed for conference

Ahmed Pasha

today's everybody Thanks joining call. for us on

be will you may Thank any have. As nice available and have you team always, day! the answer to IR questions a

Operator

for presentation. has today's attending Thank conference now The you concluded.

disconnect. You may now

The AES Corporation (AES) 7 Aug 182018 Q2 Earnings call transcript