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.