AES - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the AES Corporation Q4 2020 Financial Review Conference Call. Today, all participants will be in a listen-only mode. [Operator Instructions] As a further reminder, today's event is being recorded. At this time, I would like to turn the conference over to Ahmed Pasha, Treasurer and Vice President of Investor Relations. Please go ahead, sir.

Ahmed Pasha

welcome review fourth call. and year and everyone, financial XXXX morning, to quarter our full Good

we forward-looking Our information are to our Today, differ are release, many available be press presentation cause on website and factors that at future call. during the statements related may financial will There on making results materially XX-K GAAP with found filed Reconciliations between website and and also statements, financial our the are can in discussed the which these with XX-Q from our recent measures non-GAAP presentation. most along SEC. be aes.com.

this Joining to I over and our will and are Chief me Executive Pimenta, call the Andrés. morning President Andrés? Andrés Gluski, Gustavo that, turn Chief our Financial With Officer. Officer;

Andrés Gluski

and will XXXX morning, strategic Good for call. future. This an full provide accomplishments, review well the morning, major and fourth year which you everyone, financial financial I thank on for update our joining us and position quarter our

our short-term XXXX, and set our Bank for you on investment-grade up I rating, generation for becoming year, may recall metrics three all getting delivered second continued ourselves numbers, In compliant. catalysts last Some coal of progress. that a out stock: we Norges set and three hitting

$X.XX, delivered of about adjusted our above let numbers. to First, share of me $X.XX. hitting range our which $X.XX earnings talk We was per guidance

end free parent range our of of top which cash million. $XXX the Our flow to exceeded came million, in $XXX also million $XXX at

an S&P investment had BBB-, to rating upgraded us Fitch, November, upgraded us Second, XXXX. in which grade joining in of

basis, a is XX%. megawatt hours Bank plants by we plant comfortably building threshold renewables, of below reduce a which to pro will Norges the coal selling coal percentage produced Third, forma and retiring XX% on of by being new

with reflect All grade model, of investment dollar the off-takers contracts denominated which is of business U.S. and anchored utilities. on long-term regulated these our results resilience

of for to and signed renewables, new gigawatts of we leadership green achievements, contracts to gigawatts. advance XXXX of long-term X X at top our gigawatts also continue addition the In We of to technologies. these end our X guidance which in is in innovation range

to Slide development you As in can advantage two which In long-term of continued our synergies fueled in America. U.S., merged X and renewables conventional America, by have was AES take and the sPower AES combined Extend our Energy, South better with one Energy renewables new negotiations, we these Distributed entity, In the renewable of X, and new are companies existing scale. see the gigawatts economies capacity mostly U.S. on into PPAs and growth Clean South Green of success part our of Blend contracts.

addition of the as is the total these backlog storage; wind our energy PPAs, With X. gigawatt renewable. shown solar of new of Slide X.X the of About current half on X of and backlog projects XXX% most reached is remainder of our and gigawatts

to online AES' of XXXX, expect the gigawatts almost largest in one We bring in additions X of history. this capacity backlog

offerings business. software world. of also the Qatar was around provide its further accelerate to will systems A bidding AI-enabled leading digital Authority, the Investment capital announced XXX% grew with signed revenues its Finally, Slide the energy of joint position they turning and our maintained year provide X. acquired systems, storage prior and MW capacity. versus new venture Siemens global AMS' XXX which with its the funds product of to to the Fluence, raise development deployment leadership and Its

environment, we providing Investor next at will X comprehensive continue well solid and our be As March decarbonization growth, this can rapidly The of opportunities AES' and is Wednesday, electricity see, aggressive technology of leading we positioned long-term are a sector Day. our changing to renewables you in view very plans deployment innovations. and new

guidance for call more on for color provide to our XXXX will the financial turn results over me who and let Now Gustavo, XXXX.

Gustavo Pimenta

cover I'll in the guidance. you, during Thank Today, and our XXXX, Andrés, allocation fourth topics: XXXX, and our following morning our year capital financial the initiatives full performance key good XXXX quarter and everyone.

for Andrés due the performance of continued As a macro in for strong highlighted resilience navigating the results to setting model. conditions, We our a while demand delivered impacts Colombia. mentioned, finished solid the challenging COVID-XX lower dry year business on XXXX including of and We note, record strong growth. hydrology financial foundation our a a

pre-COVID adjusted exceeded Slide $X.XX our EPS end was of to Turning range our X. Full the guidance and of top regional of the guidance midpoint range. at year

noted, impacts hydrology. and on negative adverse lower the demand our key results were As I from

Our generation fluctuations. largely business, XX% insulated accounts which for from is more of demand earnings, our than

did the in discussed have the to the utilities of impact reduction we in past, U.S. a pandemic. our as experience However, economic demand due

Although there of XXXX, in full the second basis demand recovery has half been was a on approximately in the impact $X.XX. a year gradual

results primarily we America, years most was our markets, hydrology, record. hydrology of experienced it of Regarding worst hydrological on in except was average in $X.XX total the approximately in year where our in South one impact of on Colombia, full Colombia. hydrology The

observed higher South businesses from to the expected conditions we able to are full and improved line in XXXX, areas, historical year performance these We operating with a be two have in Colombia trend average as America. the normal contributions this our already long-term in Despite year-to-date. in the from in hydrological deliver result guidance and new the of on headwinds

expense adjusted savings We the also across billion savings, our initiatives, interest rate. refinancings benefited tax $X from of a resulting cost and portfolio from lower

slides, and PTC, an XXXX. the Slide $X.X versus for on to increase Slide with pretax XX. our $X of was SBU U.S. Adjusted the beginning four contribution, results million in over billion detail Utilities more will or cover next year, I Turning X. the

with U.S. have we may our new AES DP&L brand. yesterday, and align Utilities, the have seen rebranded IPL, you to As

commencement reflects in COVID-XX businesses the Argentina as at CCGTs America of partially availability improved impact new from and Southland contributions PTC respectively. from Higher Utilities higher Dominican ESPX in weather. known offset will contributions and the benefit by milder Lower regulatory driven Tiete as at impact Republic, at These XXXX charge outages our SBU lower at XXXX be rates the and AES of and lower and demand recovery Brazil. impacts impacts in AES XXXX. planned Ohio from PPAs MCAC by offset in in now to insurance Energy U.S. major as primarily on, these partially prior to PTC Indiana, the due reflects the AES as favorable the So at XXXX, impact South regulatory utilities and from at projects. reversion at the by well a our of by year were changes was Chivor of our in and AES in SBU at incurred the Ohio Gener Panama. were AES our in largely as renewable hydrology well Colombia These the a in hydrology PTC revision the in SBU offset drier outage hydro plant In partially

results reflect interest businesses Eurasia, Kingdom to the higher offset debt in in in the XXXX the Finally, XXXX. impact lower sold due United of repayment in partially in expense by Bulgaria,

Now profile turning credit Slide our to on XX.

last improve million. and we basis debt annualized of investment-grade XXXX. parent XX% end Our take the free metrics of above advantage significantly growing by continue free Strong reduced upon XXX an steps $X the current XXXX, ratio since to our required savings threshold parent cash low to of to us billion debt maturities further we maintain across remain and levels. our cash interest Furthermore, capturing At and improve net enabled flow one debt for and $XX environment XX%, took priorities, rating. credit rate points was a credit of to well flow year our portfolio, refinanced top our extending approximately of interest and metrics

XXXX billion total Now to side, parent cash. on capital on Slide left-hand XX. our the reflect sources discretionary allocation $X.X of Beginning

cash the exceeded Repowering OPGC $XXX flow our end top and reflect million the sell-down net sales the the from XX% Parent of in of of of $XXX million projects. of Southland our proceeds the expectation. Asset of interest sale free

from on our of XX% to investments subsidiaries Southland increasing discretionary in dividend total allocated cash the to of debt of were half. earnings shareholder right-hand repayment. in in X/X goal We U.S. subsidiaries, Moving about repowering in our Ohio. to our the the proportion side. U.S., the primarily and $XXX AES contributing renewables Approximately to uses was backlog, invested our and million the Roughly, of

mid-XXXX; initiatives; to of be to continued based an and in which of cost efficiency our XXXX Turning target expected of growth operation growth expected EPS you to million drivers that turn X gains I'll gigawatt include: Today, which Southland of project, refinancing initiating are growth $X.XX for in our X%. of discussing EPS call annual Key operations we Investor of year; on drivers over in Repowering and full with to reach forward is savings Slide million. came at to completed adjusted our XXXX average We from free to $XXX reduction. Andrés. to with including $XXX midpoint With to our adjusted all to X% XX. that, our year growth on online the in commercial XXXX savings look expectation $X.XX, and X.X renewables, next our X% digital expected due cash rates the Day long-term guidance week. is benefits our guidance XXXX for in a this growth $XXX Parent our in line from of flow interest million, back gigawatts

Andrés Gluski

Gustavo. you, Thank

of our me summarize to our in people Thanks model, and the our resilience today's goals Before financial dedication we business take strategic let and exceeded your met extraordinary call. we've the questions, all of or of XXXX.

transformation positioned growth well of rapid significant from very the on capitalize are opportunities to our sector. We arising

returns with continue With would Day discussing March the forward to As Wednesday, to your call at and to next questions. to deliver Investor our our primary strategy to is look outlook financial superior longer-term always, I our that, like shareholders. focus X. We up you open to

Operator

Today's Angie Global. first from with question [Operator Instructions] Storozynski Seaport comes

Agnieszka Storozynski

lower this So indication is XX on what that are you expecting quick and guidance, forward? that going tax effective one in guidance of is embedded your effective two tax actually an questions, rate

Gustavo Pimenta

Gustavo. Angie, a mean, - around think particularly are I this XXXX had XX%. I was lower, So year, No, we - we

expectation For mid-XXs to to XXXX, we're XXs. our high expecting back to original the go on

Agnieszka Storozynski

And a you on drag then points, guidance Brazil. Could the explain? your is year-on-year 'XX adjustment drag, GSF in one some of

Gustavo Pimenta

Yes.

some gain So hit. in especially negative, we call had also it, one-timer this but positive we had Colombia, there,

a had project life there was negative. we So $X.XX about extension to $X.XX that

out. other at each much look businesses, pretty you when So net they both

in I the businesses any wouldn't hydro expect drag So XXXX. from

Agnieszka Storozynski

Okay. And but next talking you're Moody's when do any be plans growth know rating? your have review about sense I could you to longer-term strategy that and only week, going

Gustavo Pimenta

versus basically Look, they this overall with AES, on consolidated update credit FFO their year for basis the on XX% to view lowering to a debt and XX%. came earlier positive a

us very seeing We ratios. close there, are to these

are positive. So we

the But hopefully we ratios are them is we exactly will a expect moment see move them. positive We'll they make think to what - a they I in move with make. and the we're there, this think that year.

Agnieszka Storozynski

And but yourself know then next you the again, I week, issuing the say, like, any can you soon, Day equity see next over is years? time X if Analyst comment

Andrés Gluski

Yes. Look, Hi. rates the it we have. tools Andrés. to depends, Angie, we'll that's one see And the growth this us. of is available

opportunities. We have a of lot

So that's our one of the tools in kit.

Operator

comes The from next with Richard JPMorgan. Sunderland question

Richard Sunderland

start What on Just do off storage going locally? as you in see how want And in week. maybe last events storage Texas AES the for deployment forward? to benefit the from of the role might state the

Gustavo Pimenta

grid Sure. Look, storage definitely. used resilient more to a can be make

And so storage was the What have don't in that growth you particularly storage, enormous. potential happened payments. course, Texas, in capacity of for I that think is

the incentive to frankly, existing also, well. an So a turbines. performed winterize really of Interestingly, plants very into solar wind you and quite fossil lot have the plants didn't

can So can resilient part storage locally. and play a concerned people also more yes, part, play is, are a about be to I the think it networks follow-on transmission, going

I attention that will more more So of do think light, part grid. cast resilient storage more energy as this a on

Richard Sunderland

plus more a be storage see than may the to a opportunity just that in as and forward kind do factors change? think you of general it's other solar events? So do solar going specific markets you different dying for Or kind result or of due for of storage issues

Andrés Gluski

don't make has only you don't said personal not the improved existing whole to that, own you also course, so lines, many when line. is sources. where solar Having you energy a my storage, and plus is think uses. Well, to storage, capacity, transmission plus upgrade key wind stand-alone have with It's have one I storage, remunerate of of but storage the that opinion market

positive these, the So for of the robustness sales energy grid storage. of to and of is attention a all the network, future

Richard Sunderland

last And the year? asset Any specifically year 'XX what here. sales guidance then into this into on assumptions been 'XX just announced to sales, way one has around guidance coal versus baked frame

Gustavo Pimenta

this Yes, Gustavo. is

are retirements Vietnam, year, the next and We've other sales said in probably of close which asset Effectively, between closed announced it's the the would was incorporated. that last we of year. year, this late all large early So one, here. end have India so

effectively, asset all guidance. the So are it XXXX But doesn't this retirements announced of in hit XXXX. sales incorporated and

Richard Sunderland

And incremental for are there well? sales placeholders as

Gustavo Pimenta

mean, they they'll probably if close happen, I later.

So make here. any specifically difference wouldn't for XXXX,

Operator

comes question from next Stephen The with Stanley. Byrd Morgan

Stephen Byrd

your seeing partner zero given explore the to encouraged to in from area and with overall help an get to by? capabilities corporates you're you're views wanted corporate storage I reach your AES, to Google on and interest with renewables degree that AES' of companies just global other achieve partnership emissions. Is those

Andrés Gluski

- partnership But our renewables. Very so. past we're much the much continues seeing other players, very from about relationship Google, about and also We've interest so, in progress. to talked XXxX with that similar

an that down road. we plus, presence in is we're So markets fact have this. immediately, not encouraged the but other definitely, additional And by the

Stephen Byrd

Okay.

the sounds like excited see could but near in long it but about, term, term something you're over something So we nothing time.

Okay.

Andrés Gluski

say term. wouldn't I so long No,

Stephen Byrd

Okay. just on guess financing. then And building Angie's That's on stepping little great. a question bit I maybe back,

growth? really about there, just lot me, high-quality different all in just provide innovation? bigger renewables, was folks I new have seeing to just high a as financing who approaches, - gets out as this a financing asset clean of to bigger think Are classes. curious, And great AES And in terms strikes a and storage innovative capital and growth projects. to anything many love level of financing you just sort there's You in of different at approaches tools there certainly energy you outlook of

Gustavo Pimenta

a Well, question. great it's

let's right? And that of billion growth. provided new past, the churned partnerships. we've also we We've Over or $X say, have X for so, about years a assets. that's done sold money, of our impetus And lot

partnerships. continue we'll we - do to continue sales, those do asset continue and So to to

We're in forms. or seeing lot co-investing of a you're So with us interest right. shapes different people in

very is this positive. So

good a I partner, in think at we looks who shareholders all have reputation ventures. a really these joint as

things. we're absolutely new right, you're So seeing of lot a

know, it for COVID, But come just it in say year. the as have said did didn't without would fruition, was you not which to We finance thing Tom fruition I'd to that That then, was innovative. a about always was plus. need As really come the a that past, Honestly, effort growth. I extra. was to quite this back our the one led

partnering So we're people with and lot plays. are seeing, of who different again, us technology interested are in a

Operator

Today's of with next question comes from Julien Dumoulin-Smith Bank America.

Julien Dumoulin Smith

refine ahead 'XX, back And thinking week, Congratulations, again. hold Perhaps, I'm just especially, try to kick to the it earnings off as try success both you the but going two renewable can in homogenous. to 'XX, of little you the next it context Fluence? bit in pieces? are contribution and I necessarily about here about well speak obviously. a know can as here and get about next of given renewable this How on here, expectations you is think to as renewables of ahead on renewables? renewables and But here? are you your especially to talk those you how backlog for Fluence earnings not And I do contributions getting But week,

Andrés Gluski

Yes.

it, start me I'll and to it then Gustavo. over pass Let

look, year point next view. a cutting very So just is interesting of from ribbon

We have online. coming X gigawatts that's

our in one fleet history represents is were to signed the additions of year. past. in highest And the PPAs, single a this that So which our in

about. feel we good very So that

So the in out, pointed second thing renewables is, as correctly our different you come flavors.

outside but there some hydro wind, is and half solar, energy is - there storage. U.S. about is some is is half coming about So about online and the half mostly

about very an in Fluence next year I be as see for were then seen. play about more role a will we contributor What would not a that. demand stability. big earnings phase. energy growth in say to a is that some acceleration can it's because increase, storage rapid important Regarding - uses Fluence, questions call an prior are And there And yes, this on it in grid

just accelerating see terms we break-even. result bit I that, little postponed a harder it's a because of to would growth that - basically, in And say you're it's up. in in as So gearing of hit that Fluence. time But

out Now stack. we the cube came new with

interesting bidding the actually also sales Fluence's hardware. had and we've We And from very of not using AMS addition. bought AI-enabled engine, AMS platform that's bidding a

So this cube of generally, the building I than platforms capital-intensive kind stack less would say software that have itself.

about So sooner. that will between us the help profitability turn this very break-even. and But very feel trade-off rapid good growth there's to we But starting company.

a little about of to it Gustavo the breakdown So talk to our now I'll earnings. bit pass

you Now tied of these somewhat like Extend. things I and have realize are because a Blend Green together lot

plant capacity plus contract on a a being that. with to have basically renewables fossil you So added

So with it pass to Gustavo. on I'll that,

Gustavo Pimenta

Thanks, Andrés.

would by I mostly new Julien, additions. driven say that XXXX So is

So the Southland, that's Andrés year renewables to we $X.XX. bringing year as of remember, X - full is so we altogether about had we're online, just Southland, Renewables a for said. about have of And $X.XX. then altogether half going are gigawatts

the XXXX each And then that offset other. some those you items driven additions. So is have delta mostly by

So But there side on for a was Utilities, we're particularly recovered, drag example, was expecting demand lower. the the from in have Tax tax. recovery some we there.

We the offset some also cuttings drag of tax. that have the from cost will

of Southland that, So the growth additions, primarily the the new coming of from if say I full all growth being and you from year renewables. would is of - clean mostly $X.XX

Julien Dumoulin Smith

ask can you the obvious I If here. Excellent. question

of X think then comment target year. X about for accelerating drag next to on gigs, question valuation business to your hold and continues outlook? you your annual given long-term a to light how gigawatts drag that related, that I why Obvious target? Your is, X metric improving And Fluence, on [technical development, continued suppose, difficulty] do in is on primary

Gustavo Pimenta

Sure.

see. Let's

the was question, me the first Let renewables about take growth. which

X years X been basically about we've So gigawatts. where we have

signed. PPA that, Now when we about talk that's

online probably about So months, period XX average those be normally within the a in XX brought will months. is

lag there's So a there.

have we had So strong very two years.

So X that are they're to online, going means coming online. gigawatts come actually

PPAs. sign is goal the So

The contributing going to are your earnings. second is to start actually - which

see business. we the So say, continued in renewables acceleration, let's

we - don't more of we'll forward. be feel sort it's comfortable. no going talking ahead this So a X very to X-plus us. too on of X, could It's to want get And this I about longer Wednesday,

one. a optic Fluence distributed have we Brazil, potential that another Athimos fiber telecom unicorns Fluence, we've really developing. number have started done. Now in regarding we're with ones do is had It we we the which that was some - and that rings, And more of energy,

a in we're say ways. So value different I lot of, would of creating lot that with Fluence two

First, our half component. we're PPAs that renewable have energy storage of signing an

there, it that. really makes how to mean, right storage So creative. understanding what a prize use competitive, we be Hawaii, as and for I us we did in to won know, very you how energy

other have We Hawaii. on projects in coming

world's have virtual the reservoir. We first

We have of uses. new a number

part And of that applications So of many AES of and through growth we're affluence Fluence. is Fluence itself. then getting is that are we engine new helping the valuation it because creating

you So Authority. Middle started this investments in the the if batteries in at stage it well. other at with valuation expect its I Investment a the clients look Qatar Qatari for to potential We NABROS excellent partner to particularly of do is Fluence, very like technologies, from East.

financial is strategic of between somewhere this kind here. investor and So a the

any get don't rid think now the So no, I to is way. Fluence of time in

it for in we're think term. long the I

energy think I just with storage. see it. the think starting no, here will future real pleased I opportunities very But, in there to we're inflection for that are point evaluate. And we're the we

Operator

from question with Our Morningstar. comes Fishman Instructions] Charles next [Operator

Charles Fishman

by it? morning. targeting you commercial Alto I of the make operation Maipo Good know year, did Andrés, you for were end

Andrés Gluski

year, well, over I'd putting - last work or very in XXXX. the all targeting to It's It completing been were this terms and we and say in already along will room. XXXX We coming this are very a maybe of we've in tunneling turbines year targeting But the close the work, lot originally. done we've machine so, year. be the of

various Alto know, very and at construction you online start year. got producing. you you complete Alto before the then basically will it water with tunnels construction, nicely, And you Maipo. So Maipo pleased up is this But come we're proceeding to all with fill as

Charles Fishman

first that determining they're looks primary metric dividend just the Board And XX% the that going back looking still free been Okay. Is they're the Is consistent the X last going pretty flow. of use tool it at? years, the like metric for to cash looks going dividend to still then or I'm over on use the policy, being forward? the you've dividend on parent

Andrés Gluski

we We have investors. really dividend is for look see if that think competitive a to our we

X% So dividend. to what we're our targeting X% going forward is a between in growth

the dividend the - go time of think had fastest-growing past anybody, I we we've years, X longer of you had if the probably take really, or if X fastest-growing years, dividend you in the frame.

as which and dividend growth is with our that to we forecasting the in past, we're think grow our So X% to we've continue happy X% sector. our to competitive been in X%, we'll X%

Charles Fishman

but that - it's about importance? secondary is free the won't fact XX% of just flow I cash So just it's coincidental, been say

Gustavo Pimenta

That's correct. cash free We're not targeting flow a payout of sense. that in our

not sure It's dividend attractive really So our target. to the have that's shareholders. make payment that for really we an

Operator

showing are queue time, like At Pasha time, our closing no turn session. back we the Ahmed question-and-answer further and to this concludes questions to over remarks. any conference would for the this this in I At

Ahmed Pasha

on Thanks. Thanks, joining everybody, for call. today's us

questions IR always, to may team the available answer be As you any have. will

to with Virtual nice Day. forward Thank Investor day. our speaking we look a you again at and week, Next have you,

Operator

presentation, Thank attending The has disconnect. conference for now and you concluded. may you now today's

The AES Corporation (AES) 25 Feb 212020 Q4 Earnings call transcript