The AES Corporation

Good morning and welcome to the AES Corporation Third Quarter 2019 Financial Review Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note today's event is being recorded. I would now like to turn the conference over to Ahmed Pasha, Vice President of Investor Relations. Please go ahead.

Thank you, Andrea. Good morning and welcome to our third quarter 2019 financial review call. Our press release, presentation, and related financial information are available on our website at aes.com. Today, we will be making forward-looking statements during the call. There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors. Joining me this morning are Andres Klosky, our President and Chief Executive Officer, Gustavo Pimenta, our Chief Financial Officer, and other senior members of our management team. With that, I will turn the call over to Andres.

Andres? Good morning, everyone. and thank you for joining our third quarter 2019 financial review call. Today I will walk through the highlights of the quarter and how we are delivering on our commitments and successfully executing on our strategy. Gustavo will then follow with a detailed description of our third quarter and year-to-date financial results. Our adjusted earnings per share for the third quarter was 48 cents, which is 37% higher than our results for the same quarter last year. On our prior call, we mentioned that much of our growth would be in the second half of the year and our strong third quarter results are in line with our expectations. We're on track to deliver on our 2019 adjusted EPS guidance with a midpoint of $1.34 and our parent free cash flow target with a midpoint of $725 million. And we're confident in our ability to deliver 7% to 9% average annual growth through 2022. I am pleased to report that we're making good progress on the strategy we laid out on our previous calls. Allow me to walk you through step by step. First, turning to slide four, let us talk about our progress towards becoming investment grade. As you may have seen in this morning's press release, we received an investment grade rating for the first time in AES's history. I'm very pleased to have achieved this milestone reflects a multi-year transformation strategy to make our business simpler and more predictable. We not only significantly strengthen our balance sheet, but we have also materially reduced our exposure to risks such as hydrology, foreign currencies, and commodities. Moving to slide five and our growth in renewables. This quarter, we signed over 900 megawatts of new renewable power purchase agreements. bringing our year-to-date total to 1.9 gigawatts. We're fully confident that we will consistently deliver 2 to 3 gigawatts of new renewable capacity every year. As of today, our backlog of projects is 6 gigawatts, half of which are under construction and half have signed PPAs. As anticipated, about half of these projects are in the U.S. and half are international. We see ourselves as uniquely positioned in the renewable space to take advantage of synergies and economies of scale while also benefiting from sufficient geographical diversity. Looking at this from another perspective on slide six, approximately 80% of our six gigawatt backlog or 4.8 gigawatts is renewables split between hydro, solar, wind, and energy storage. We expect the majority of our backlog to be online by the end of 2022. Now on to specific large projects. On slide 7, we can see that the 1.3 gigawatt Southland repowering project is virtually complete, and we are currently in the final commissioning stage. We're on track to begin commercial operations in early 2020. Turning to slide 8, AES-HENER is also making good progress on the Alto Maipo hydroelectric project. The project is 82% complete, including 37 miles of tunneling, and both caverns for the powerhouses. Less than four miles of tunneling remain to finish phase one by year-end 2020, at which time the construction of all 531 megawatts of capacity will be completed. In parallel, they're progressing well on the tunneling of phase two, which will provide additional water to the project. Let us now discuss the advances we are making on our LNG strategy and turn to slide nine. Last month, we received approval from the government of Vietnam to develop and build a 2.2 gigawatt combined cycle gas turbine project alongside our previously approved 480 terabitu LNG regasification and storage terminal. This complex will have a 20-year U.S. dollar denominated contract with no commodity exposure. We expect to achieve financial close in 2021 and commercial operations in 2024. We see the expansion of our LNG infrastructure business as complementary to our renewables growth strategy by offering a clean, predictable, and low-cost fuel that provides capacity and flexibility to the system. We are focusing our LNG business on three markets, the Caribbean, Central America, and Southeast Asia. In all of these markets, there is rapidly growing demand for natural gas to supply new generation and to displace higher cost diesel fuel oil. A good example of how we're benefiting from this growing demand is the Dominican Republic. As shown on slide 10, this quarter we finalized a joint venture with other local generators. As a result of this JV, we will build a second LNG storage tank, expanding our capacity in the Dominican Republic by 80% or an additional 50 terabit to use. We have already signed or in advanced negotiations for 30 tera BTU of this additional capacity under long-term U.S. dollar-denominated contracts. This expansion will require minimal investment from AES, and we expect to break ground in the first quarter of 2020, with completion in late 2022. As we had previously mentioned, our LNG business is easily scalable, which allows us to increase our margin while requiring relatively little investment from AES. While we are delivering on our commitments in our guidance periods, we're also making investments to maintain our leadership in new technologies, which will contribute to our earnings growth in future years. We are currently the global market leader in energy storage and the market leader for cloud-based energy efficiency solutions in the U.S. Turning to slide 11, today we're announcing a strategic alliance with Google to collaborate on innovation across our business lines. We will be working together to find new solutions to accelerate the broad adoption of renewables and energy storage and to improve the experience of corporate customers. AES will collaborate with Google Cloud on energy management and opportunities to develop, own, and operate projects in targeted markets in the U.S. and Latin America that have the potential to help Google meet its clean energy objectives. In addition to providing the potential for additional revenues for AES, this alliance will put both of us on the front line of innovation in the industry, allowing us to further reduce costs, optimize operations, and meet changing customer expectations. On slide 12, we can see that our strategic investment in the leading U.S. cloud-based digital solutions provider in our sector, Uplight, is progressing well. This is a business that is growing rapidly from a base of $100 million in annual revenue. It is cash and margin positive and will provide broad insights into customer behavior and energy efficiency. Our energy storage business, Fluence, continues to be the global market leader. Through Fluence, our 50-50 joint venture with Siemens, we are able to capture the accelerated growth in demand for this technology. As you can see on slide 13, in the first three quarters of 2019 alone, Fluence won contracts for 806 megawatts. Compared to the third quarter of 2018, Fluence has tripled its backlog, which now stands at a record high of more than 1 gigawatt, with a combined value of roughly $1 billion. Fluence is cash and variable margin positive and continuing to expand its capabilities in order to meet the scale requirements of the business. Our leading position in energy storage is providing us with a competitive advantage in other aspects of our business. We're seeing that nearly half of all solar projects in the US include a storage component. Based on our scale and more than 10 years of experience in integrating energy storage, we are very well positioned to capitalize on this growth opportunity. Now I'll turn the call over to Gustavo. to discuss our financial results and capital allocation in more detail.

Thank you, Andres. Today, I'll cover our financial results, outlook for 2019, and capital allocation. Overall, we are very encouraged by our performance to date and remain confident in our ability to deliver on our strategic and financial objectives. As shown on slide 15, in the third quarter, adjusted EPS was 48 cents. primarily reflecting contributions from new businesses, including AS Cologne and renewables in the US, and a lower tax rate. The timing of outages net of related insurance recovery also had a positive impact on results in our MCEC region. In the third quarter of 2018, a freak lightning strike caused major damage at our Andres plant in the Dominican Republic, forcing it offline with a roughly 4 cent impact. In Panama, our Changuinola plant has been on an extended planet outage for most of this year. While we have insurance to offset a large portion of these outages, the timing of recognition is not always evenly distributed throughout the year. On our second quarter call, we indicated that we expected a recovery in the second half related to these outages. And in fact, the majority of this occurred in the third quarter. This was about five cents. which effectively catches us up for the first half of the year. As seen on slide 16, on a year-to-date basis, the net impact of losses versus insurance recovery is slightly negative at one cent. Importantly, our Andres facility is fully online and our Changinalla plant is on track to come back online in early 2020. Turning to slide 17, adjusted pre-tax contribution, or PTC, was $426 million for the quarter. an increase of $99 million, or 30%. I will cover our results in more detail over the next four slides, beginning on slide 18. In the U.S. and utilities SBU, increased PTC reflects contributions from new renewable projects, as well as the resolution of regulated rate cases last year. These impacts were partially offset by the exit of 360 megawatts of coal-fired generation at Shady Point. Regarding this DPL's DMR extension filing, we remain on track for an expected ruling in the first half of 2020 and continue to feel confident about the merits of our case. In Indiana, IPL's plan to modernize its electric grid, which costs for $1.2 billion of T&D investment over seven years, will go to hearing on November 14th. Costs would be recovered through an 80% tracker mechanism between rate cases. and AES equity investment would be roughly $200 million. If approved, the plan would be a key component of the mid-single-digit rate-based growth we have discussed in the past. A final ruling in the case is expected by early 2020. At our South America SBU, higher PTC was largely driven by improved margins at Guacoda and lower interest in Chile, as well as higher pricing in Colombia. I'd like to take a moment now to discuss recent developments in Argentina. As you know, Argentina recently elected Alberto Fernandez as their new president, as expected. The policies of the incoming government are yet to be defined, but we do not expect a meaningful impact on our outlook, especially given the quality of our assets and the material improvement we have achieved in AES's portfolio over the last several years. Right now, current controls are in place, and we will face restrictions in sending dividends out of Argentina. But as a result of our diversified portfolio, we will be able to mitigate the impact and continue to deliver strong cash flow growth to our shareholders. Turning back to our quarterly results, as I discussed earlier, higher PTC at our MCCS view reflects the outages in the Dominican Republic and Panama, net of related insurance recovery, as well as the commencement of operations at AS Cologne. Finally, in Eurasia, low results primarily reflect a one-time transmission charge and lower capacity during testing and commissioning at OPGC2. Now to slide 22. To summarize our performance in the first three quarters of the year, we earned adjusted EPS over $1.02 versus $0.88 last year, In the fourth quarter, we expected a higher quarterly tax rate versus the 24% we saw last year, and an impact from the planned outage at our world-run facility in the U.S. On a full-year basis for 2019, we feel very confident in reaffirming our adjusted EPS guidance of $1.30 to $1.38. Further, based on our achievements to date and current outlook, we are also reaffirming our 79% average annual growth through 2022. Consistent with our prior practice, we will provide specific guidance for 2020 on our fourth quarter call. Turning to 2019 parent capital allocation on slide 23. Beginning on the left-hand side, sources reflect the $1.3 billion of total discretionary cash, which is largely consistent with our last call. Additionally, we are able to take advantage of available debt capacity at one of our subsidiaries to upstream $200 million in return of capital to the parent. The majority of our discretionary cash continues to come from the roughly $725 million of parent-free cash flow and $350 million of asset sale proceeds. Asset sales include Northern Ireland and the S-Power sell-down, both of which have closed as well as Jordan, which is expected to close by year-end. Now to the uses on the right-hand side. Including the 5% dividend increase we announced in December, we'll be returning $361 million to shareholders. We allocated $450 million to parent debt pay down versus our prior target of $150 million for this year to accelerate our credit improvement and reinforce our commitment to achieve investment-grade ratings. As a result, we expected to end the year at 3.5 times parent leverage and 22% FFO to debt, comfortably within the investment grade thresholds of 4 times and 20% respectively. To that end, as Andres mentioned, we are very pleased to see positive actions by the rating agencies, including an investment grade rating front feature. We are also investing $450 million in our subsidiaries, leaving about $50 million of unallocated cash. Finally, moving to our capital location from 2019 through 2022, beginning on slide 24. We expected our portfolio to generate $4.2 billion in discretionary cash, which is again consistent with our last call, plus the additional $200 million in return of capital I just mentioned. More than three-quarters of our discretionary cash is expected to be generated from parent-free cash flow. The remaining $800 million comes from asset sale proceeds, about half of which has been announced or closed this year. Turning to the use of this discretionary cash on slide 25, roughly 40% of this cash will be allocated to shareholder dividends. Looking forward, subject to annual review by the board, we expect the dividend to grow 4% to 6% per year, in line with the industry average. We have completed $450 million of parent debt prepayment this year. This is an increase versus our prior target of $300 million. We are also expecting to use $1.9 billion to invest in our backlog, new projected BPAs, T&D investments at IPL, and the partial funding of our Vietnam LNG project. Once completed, all of these projects will contribute to our growth through 2022 and beyond. The remaining $300 million of unallocated cash will be used in accordance with our capital allocation framework to achieve our financial objectives. With that, I'll turn the call back over to Andres.

Thanks, Gustavo. Before we open the call to your questions, please allow me to summarize our key points. Our strong third quarter results demonstrate our successful execution, and we remain on track to meet our 2019 guidance and longer-term expectations. We are uniquely positioned to drive long-term shareholder value through strengthening our balance sheet and credit ratings, reducing our carbon intensity, growing our backlog of attractive renewable opportunities, and rapidly expanding our LNG infrastructure business. We're taking steps to consolidate our position as a technology leader through technologies such as energy storage and cloud-based energy solutions, and most recently, creating a strategic alliance with Google. We believe that our strategy and execution Position us well to offer double-digit total returns to our shareholders. Operator, we're now ready to take questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And our first question comes from Julian Dumoulin-Smith of Bank of America. Please go ahead.

Hey, good morning, team. Congratulations to you all.

Thank you, Julian.

Absolutely. So perhaps can you elaborate a little bit in the context of the quarterly earnings here? How much was coming directly from renewables and And perhaps to take that a step further, how do you think about the cadence of renewable contributions from here on out? Obviously, we're starting to see it pick up. How do you think about that rolling into the four to six, or I know not to get ahead of 20, but how do you think about that even year over year here?

Hi, Julian, Gustavo. So particularly in the quarter, most of the growth is in the MCAC region, as I mentioned in my remarks. So the U.S. On the renewable space, probably we have a cent, cent to two cents in the quarter, no more than that. And so that's probably what it should be seeing on an annual basis, maybe four cents to five cents growth, because we are deploying around $300 million globally, most of that in the U.S. So that's what you'll be seeing going forward.

Got it. And then perhaps more importantly here in the near term, You talk about some new LNG opportunities, the JV effort. Also, from what I understand, you have some excess marketing volumes, if you will, in Panama going into 2020 given the IMO regulations. How do you think about the timing to monetize some of those remaining volumes and also the earnings profile of your latest expansion on LNG? Perhaps you can address it more holistically on LNG for simplicity purposes. Sure.

This is Andres. So I think we've done exactly what we had been sort of saying that we could do in the Dominican Republic. So basically we filled up our, you know, 70 terabitu tank there. So basically it's at full capacity. By signing this joint venture with other local generators, you know, we need additional capacity. So we're going to build a second tank with 50 terabitu capacity. And about 30 terabitu is either agreed to or in the process of signing agreements for. So that's already quite, you know, taking up, you know, 60% of the new capacity of the new tank. So this, in the Dominican Republic, you know, I think we have really followed through on what we said was possible. In the case of Panama, we have an 80 terabitu tank. Right now that's at most about 30% used. And so there's considerable capacity to put other generators on gas. And so, you know, Panama does have other natural gas projects. It also has a lot of diesel plants not too far from our plant. So, you know, really it's a question of how fast we can connect those. It also has the capacity for re-export, just like we have in the Dominican Republic. and also for CNG in terms of trucks and local industry. So I think the point is that in the Dominican Republic, you know, we do have capacity now for once we complete this tank for another 20 terabit to use, and we continue to have about 50 terabit to use in Panama that are available. So it's going to be a combination of, as we did in the Dominican Republic, local demand, you know, additional power plants, It's going to be additional industries and transportation. And, you know, I think growing over time is the re-export. So we are exporting natural gas from the Dominican Republic to, for example, Guyana, Barbados, Haiti, and there are other possibilities as well. And obviously the Central American region has possibilities as well for the export of natural gas.

But not ready to quantify earnings contributions or earnings growth in that segment.

Look, we think that the potential is maybe five to four cents by 2022. Yeah, in the MCIC. I mean, this is not counting, of course, what we could be doing in Vietnam. So, you know, this is what we have in the Vietnam project. It would be another, you know, 300 plus million of equity going into the project. And, you know, we expect good returns on that as well. So as you can see, that would be a big, a contributor to our earnings growth post, you know, 2024.

Right. The 4 to 5 cents is off of today's in terms of incremental growth through 22.

That's correct. That's the opportunity. So, you know, in the past we had talked about 5 cents, you know, what we basically filled up some of that in the Dominican Republic. So the additional tank puts us back at another sort of 4 to 5 cents of potential upside.

Excellent, Guy. Thank you.

Thank you.

Our next question comes from Greg Gordon of Evercore ISI. Please go ahead.

Thanks. Good morning. Great, great update. A couple questions. I think you just answered, partly answered one of them. You have $200 million allocated in your slide 25 to Vietnam LNG and CCGT investment, but I was going to ask whether that's the total expected investment because I guess it comes online in 2024, and you actually just said it would be $300 million to $400 million. Is that right?

That's Gustavo here, Greg. That's right. So that is in 2022, so we're probably going to reach financial close in 2021, spend half of the equity in 2022, which is this $200 million that you see in the chart, and then 2023 we'll draw an additional $150 million to complement the investment.

Yeah, and I know you haven't disclosed contract terms, but you would expect to target like a mid-teens levered equity return on projects with this risk profile. Is that fair? That's about right, yeah. Okay. And can you give us a sense of what a strategic alliance like the one you've announced with Google means in terms of your competitive advantage signing projects? you know, commercial agreements with them and how that translates into, you know, confidence in the growth profile at the renewables business. It's just hard to, you know, not to be cynical, but it's hard to separate, you know, what's a PR announcement versus what has tangible backlog implications.

Yes. Well, you know, Greg, as you know, that we've been, I think, certainly not people to sort of chase shiny objects. You know, we really go to the fundamentals. What does this mean? Now, this is a preliminary announcement. You know, it has many components to it. And we will be providing color as, you know, things develop and things materialize. But realize, you know, first that we are sort of uniquely positioned to help Google meet its 24-7 renewable, you know, zero-carbon energy across the globe. So, you know, we are uniquely positioned to do that. We recently won a bid in Chile for about 125 megawatts to do exactly that. So that was the first stage, you know, concrete. There will be others, we believe. And as I said, it will be in targeted U.S. and Latin American markets. Second is to realize that the fastest growing sector of corporate demand is Web Services. So I believe Google has announced about six gigawatts of need across the globe. So this is, you know, it's a big target. It's growing. And this is the fastest growing corporate sector. What they want is renewable energy around the clock. We are uniquely well positioned to deliver that. So, again, there will be, you know, follow-ons to the Chile deal, we believe, and, you know, stay tuned to that. In addition, there's some elements of energy management in these locations for us, using our portfolio to provide carbon-free, round-the-clock energy. Then there is also, I would say, on our platform, the opportunity to optimize and continue to deliver cost reductions. So we've been spending years, quite frankly, cleaning up data. Because, again, there are a lot of buzzwords that people throw out, AI, machine learning. Well, it's only as good as the data you have. So, you know, we've been cleaning up the laborious and, you know, very hard task of having the right data in place. So we believe by combining our two capabilities, you know, we've been the leader in new applications in our sector. You know, we'll give us really a boost to the cost-saving initiatives we have mentioned. It will also give us a boost in terms of delivering on, you know, we're continually changing customer expectations. So expect this alliance, you know, to make, you know, very concrete announcements into the future. So this is not just sort of a feel-good PR announcement. It really is that the two of us combined, you know, we're leaders in certain areas, you know, such as energy storage, you know, energy efficiency solutions in the U.S., So I think it makes a whole lot of sense. This is, you know, sort of two plus two equals six. And, you know, this is really all of this would be basically upside to what we have in our numbers. And we're going to dedicate, you know, people and resources to make sure this is something very concrete. In terms of, you know, when it would really make an impact on our earnings, that's probably, you know, I'd say two or three years out at a minimum. because this is really sort of setting the groundwork. Because even if you win new power purchase agreements, you have to build them. These require additionality. So just to put that in context, I think it's very important, but it's not going to have an immediate impact on us.

Great. Last question for you on the Fluence JV, obviously making good progress. It doesn't sound like right now it's actually – creating any concrete economic value in terms of cash distributions or earnings contributions to EES Corp. But, you know, when do we get to a tipping point where it's either potentially a significant cash flow earnings contributor, or is there another way that we monetize this value for shareholders? Like, could this be a standalone, you know, sort of public market IPO at some point if it really gets to critical mass? I mean, what are the different ways now that you're really making headway in selling the product globally that you can monetize that value for shareholders?

Well, yes. You know, you've hit, I think, the nail on the head. It's really how do we monetize that value. This is not, you know, a regulated asset that's a marginal contributor. We have to think about it differently. So, you know, we've created a market leader in a market that's growing at 100% per year that's going to have a major impact on the future of our sector. So, again, it's not sort of a marginal investment. You have to think about all the value we're creating by this. As we mentioned, it is cash and variable margin positive, but that money is going into the business to prepare it for really scaling up. I mean, it grew 100% last year, so you have to scale it up. So I think it's creating a lot of value for our shareholders directly in the business. At some point, it will probably make sense to really have a marker out there so you guys can get a feeling for what it's worth because we think we've created a lot of value. in the business. There are various ways to do that, but I think a marker would be very good to be able to put it into what's its value within the AES portfolio. But I have no doubt that this is going to be a major part of our business going forward, and I mean our sector going forward, and do realize that it is giving us a competitive advantage in winning renewable PPAs because we know as much as anybody about how to integrate energy storage And some very exciting developments coming in the Fluence space, so stay tuned in terms of products and in terms of new ideas. So, for example, one in Chile, we're making the world's first virtual reservoir, where you can take a run-of-the-river hydro, which is Las Lejas, and really, instead of having to dispatch the energy 24-7, you can, quite frankly – not dispatch it when energy prices are low, mostly due to solar, and inject that energy when prices are much higher. So there's a lot of innovation going on. It's very exciting.

Guys, thank you very much. Have a great day.

Our next question comes from Christopher Chenier of J.P. Morgan. Please go ahead.

Good morning. I just wanted to go through the quarter a little bit here and 2019 as a whole. in terms of kind of non-recurring items, so $0.48 for the third quarter adjusted EPS. Is it fair that the $0.05 of insurance proceeds there are non-recurring? And with the, I guess, plants back online in Panama now, anything else to think about for the fourth quarter or continuing into 2020 in relationship to that?

Hey, Chris Gustavo here. No, not really. I think the five cents is recurring because it's a catch up from the first half. We may recall in the second call, second quarter call, we've mentioned that our first half was slightly weaker versus our expectation due to those outages and we expected to recover a large portion of that impact in Q3, Q4 and that's what happened. So it's really a catch up from the first half. You should read this as a first half figure. and not as a one-timer. So that's what it is.

Okay. And then I think you said kind of net of the insurance, it would still be a penny negative for you for the Panama outage at least. So would that imply that kind of your 2020 number or there would be kind of no residual effects going into 2020, the net 19 number would be almost not impacted?

That's correct. That's correct.

Okay. And any other kind of non-recurring items helping or hurting 3Q in terms of having a meaningful effect?

Not really. I think the one that I pointed out in my remarks was tax. It's relatively within the range on a year-to-date basis, but you may recall last year we had an unusual low tax rate, so that is one thing for us that will probably won't be happening in the Q4 this year, but a part of that, nothing, no one-timers.

Okay. And then just, I guess, a little bit longer term, when we look at what's occurred so far this year after you introduced your kind of new long-term plan or rolled forward your long-term plan back in February, you've reached investment grade maybe a little bit faster. In the plan, interest rates have been kind of going in your favor and everyone's favor. Some LNG success certainly has materialized, maybe partly offset by the Ohio DMR situation. I'm just wondering kind of where the bigger maybe surprises versus your plan have occurred, if any, your long-term plan, that is.

Yeah, Chris, I agree with everything except what you said about the DMR. You know, we think that continue to feel good about a successful resolution of this. So, you know, we agree that we've had some upsides. And I think, quite frankly, those things which are under control, we've consistently, I think, over-delivered, you know, whether it's paying down debt, reducing costs, growing the LNG business, or growing renewables. So that's true. But we really don't see the – I wouldn't put the DMR as – we continue to feel good about it, and it remains on track.

Okay, so kind of rolling all that together, it sounds like you feel like you're executing on your plan and really not getting ahead of yourselves at all in terms of some of the positives that have occurred.

You know, again, we are executing on our plan, and I think we've delivered some things ahead of schedule. That is certainly true. I mean, we have been talking about getting our sort of investment-grade stats this year. But, you know, we up-fronted that. We paid down more debt. I think it's very important that, you know, we said we'd pay down $150 million of recourse debt, and we paid down $450 million. So, you know, we have been over-delivering.

Okay, excellent. Thanks very much, Andres. Thank you.

Our next question is from Ali Agha of SunTrust. Please go ahead.

Thank you. Good morning. Good morning, Ali. Good morning. Andres, the first question, I recall, I think it was maybe last quarter or two quarters back, when you rolled forward your growth aspirations and, you know, came up with a 7% to 9% growth rate for 18 through 22, At that time, you had also told us that, you know, the old growth rate, which was 17 through 20 and 8 to 10 percent, that you would end up at the high end of that growth rate. I just want to confirm that that's still your conviction as we sit here today.

Ali Gustavo here. The short answer is yes. We'll be providing caller on February, but as I said in my remarks, we are reaffirming the 7 to 9, and to your question, yes, that's our expectation.

Okay. Second question, you know, looking through your numbers, year to date, you've got about $124 million of distribution from Argentina to the parent. Is that a good number or a run rate for the annual Argentine cash flow subsidiary distributions? And how should we think about, you know, the capital controls that are currently in place or your prior experience perhaps in dealing with the leftist government in terms of what the cash flow implications and offsets could be going forward?

Okay, yes. Regarding Argentina, no, that's not the run rate. What we had said in the past, as you know, that we had three years where we did not distribute dollar dividends from Argentina. And so there was a catch-up in recent years. Now, having a portfolio like ours, As Gustavo mentioned in his speech, we don't expect this to affect us. So Argentina is one that is a little bit up and down. We've been there in good times. We've been there in bad times. We've always made money. Even in 2002, we made money in Argentina, and that, I think, reflects the quality of our assets and the fact that they're very lowly levered. So this is not sort of the run rate. With current – Exchange controls in place. You know, we don't expect to be paying material dividends out of Argentina, certainly next year. But, you know, we've always, you know, again, operated well there. We have put a big back office there. And so that's one way of, quite frankly, if you will, dollarizing is by using our pesos in Argentina to get services which are worth dollars to us. So that helps offset some of this. So, you know, to be clear, in Argentina, we've always made money. We've always been capable of paying dividends. Just we haven't always been able to buy the dollar. So, you know, if you look historically, the average is more like, you know, 70 million or so, and it's been like 5% to 6% of subsidiary distributions over time. So, you know, and this is quite frankly what I expect in Argentina. It's kind of up and down. but we've operated well there. And, you know, I expect this, you know, again, sort of up and downs, but it's not something that's going to materially affect our forecast.

Okay. And then finally, Andres, you know, another topic that, you know, in prior quarters used to get more attention, but we're not hearing much about is Britsa and Bulgaria. Can you just give us an update of anything that's going on there on the contract or what your expectations are looking forward?

Sure. Really, we have nothing new to report on Maritza. That's why it wasn't part of our speech. We continue to be paid on time. The plant is being dispatched, and now we're entering the winter season, which becomes even more important. They're up to date on their payments. The offtaker's financial situation, NEC, is strong. The country is growing strong, and it remains investment-grade. So those things continue. And, you know, regarding the illegal state aid case in front of the European Commission, you know, our advisors continue to talk. So we have no official case yet, and they continue to talk. And so, you know, as we said before, we have really nothing new to report, but the asset's doing well.

Got it. Thank you.

Thank you, Alin.

Our next question comes from Charles Fishman of Morningstar. Please go ahead.

Good morning. Andres, on the Vietnam contract, okay, the project's approved by Vietnam, and you said you're in negotiations, I guess, for the long-term contracts. Will the contracts be with the government, or were you referring to contracts with LNG inputters? What contracts are those?

Charles, that's a good question. Basically, look, there are two projects, both supporting each other. So the first is the 480 terabitu regasification and storage terminal. So to put that in context, today we have about 150 terabitus between Panama and the Dominican Republic. You know, with the additional 50 terabitus, they'll go up to about 200. So this is a very large project. Now, in this case, we have about 38% of the project, and Petro-Vietnam has the remainder. So we have a partner in this project. So where will the gas go? There's about six gigawatts, I believe, of gas-fired turbines in Vietnam that have been using offshore gas, which is running out. So there will be immediately a demand for the LNG terminal in addition to our 2.2 gigawatts of combined cycle gas plants, which would be using that gas. Now, on the second project, on the combined cycle gas turbine plants, the 2.2 gigawatts, we own 100% of that. So when we talk about contracts, there are different contracts here. So one would be, of course, the contract between the LNG terminal and the – generators, including ourselves. Then there's the offtake of the energy and capacity coming from the 2.2 gigawatts of new generation. And I realize we have a 1.3 gigawatt plant already in Vietnam, Mang Giang Thu, which has done very well. It's one of the best performers in the country. We built it on time and on budget. It has a long-term dollar-based contract. It's been paid on time. So Basically, it would be like a repeat of Mong Jong-2, only burning gas this time. The other contracts, for example, between the supply of gas to – this is Son Mai. Son Mai 2 is the name of the terminal. That contracts have yet to be negotiated, and obviously it would be, you know, Petro-Vietnam and ourselves negotiating with U.S. gas suppliers. So those have yet to be negotiated. But, you know, in general, it's a – you know, very firm commitment by us and by the government of Vietnam to do this project. And so I'd say the one thing that distinguishes it from, say, the projects in Panama and the Dominican Republic is that the demand is there. So it's not a question of building a terminal storage facility where the anchor tenant plant that you build is 30% of it. In this case, it's going to be used, the use is going to be much, much faster getting to, you know, 90% plus usage.

That's helpful. Thank you. That's all I had. Thanks. Thank you.

Our next question comes from Greg Orrell of UBS. Please go ahead.

Yes, thank you. I was wondering if you could touch on the BHP contract, BHP buyout of a PPA in Chile and whether that was a driver for the return of capital increase that you reported in the quarter?

Okay, so there are two parts. Responding to the second, absolutely no. Nothing has occurred yet. This would take effect in two years. So, you know, it hasn't affected our returns of ASNR at all at this point. The second was that, you know, BHP has a mandate from CORP to go green. So they put out a a bid for six terawatt hours of new energy. And, you know, what came back was basically about a bit more than half of it was existing hydros in Chile. The other ones are renewables. So this will replace our existing contract. Now, our contracts, generally, we make our money on capacity payment. Energy is a pass-through. So per our contract, they have to make us whole if they're not going to use our capacity. So they have mentioned a number in their press release of a value of about $780 million. This has yet to be absolute. The exact number has yet to be negotiated. We think it's sort of around $800 million that this has yet to be negotiated. But basically this shows, I think, the strength of our contracts in Chile. A lot of people were questioning the value of these contracts, and I think this shows that these contracts are very solid. So they will pay us for this contract. You know, the present value of that future capacity was running through 2029. And, you know, there's still about – the plant is about 20% contracted. And so this will be, you know, it's a business decision by BHP. And, you know, it, I think, shows the strength of our contracts and the business in Chile.

Do you think that will impact your growth rate guidance?

No, absolutely not.

Okay, thank you.

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

We thank everybody for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have. Next week, we look forward to seeing many of you at the EEI conference in Orlando. Thanks again, and have a nice day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.