The AES Corporation

Good morning and welcome to the AES Corporation's fourth quarter 2019 financial review conference call. All participants will be in a 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, may press star then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this 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, Aneta. Good morning and welcome to our full year 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 financial review call. Today I will discuss our 2019 performance and our strategy to continue delivering attractive returns to our shareholders. I'll begin with some of the key highlights for this call on slide three. In 2019, we earned $1.36 of adjusted EPS, 10% higher than in 2018, and toward the top end of our range of $1.30 to $1.38. We are reaffirming our 7% to 9% average annual growth in adjusted EPS and parent free cash flow through 2022. In 2019, after reducing our parent debt by half, we were upgraded to an investment grade rating for the first time in AES's history. In 2019, we completed construction of 2.2 gigawatts of new projects. We also signed 2.8 gigawatts of renewable contracts, bringing our backlog to 6.1 gigawatts. This space puts us on track to nearly triple our portfolio of renewables in operation to 22 gigawatts by the end of 2024 versus 2016. We achieved critical milestones in expanding our LNG infrastructure in the Dominican Republic, Panama, and Vietnam. To accelerate a broader adoption of clean energy, we are delivering innovative energy solutions through our leading platforms, including Fluence, Uplight, and our strategic alliance with Google. Considering our success to date in substantially lowering our carbon intensity, today I'm announcing a target to reduce our coal-fired generation to below 30% measured in megawatt hours by the end of this year. Furthermore, we expect to reduce it to less than 10% by 2030. Turning now to our strategy on slide four, we spent the last several years positioning AES to lead the energy transition and cementing our place as a top renewable developer throughout the Western Hemisphere. Today, I will discuss the three core themes of our strategy. Investing in sustainable growth, offering innovative solutions, and delivering superior results. Through our strong presence in key markets, we are well positioned to benefit from the global transition towards more sustainable energy. In these markets, we see growth in clean energy of 30 gigawatts per year. By capitalizing on our competitive position and the dynamics favoring clean power generation, we have had great success in increasing our backlog of signed PPAs. Turning now to that backlog of projects beginning on slide five. In 2019, we signed long-term PPAs for 2.8 gigawatts, of which approximately half is wind, 40% is solar, and 10% is energy storage. 40% of this capacity is in the U.S., and 60% is located internationally. Turning to slide six, beginning with the U.S., our S-Power and AES distributed energy businesses maintain their momentum by adding more than one gigawatt of new long-term contracted renewable projects to our backlog. The rate of growth from our distributed energy business is particularly impressive. In 2019, it signed 365 megawatts under long-term PPAs, three times more than in 2018. One of the reasons for this business's success is its steep knowledge of customers and specific markets, including Hawaii and the northeastern U.S. For example, in Hawaii, we delivered the world's largest solar plus storage project, and during the year, we were awarded an additional 205 megawatts of similar projects. As a reminder, our renewable investments are expected to produce low- to high-teen IRRs across our markets, assuming conservative terminal values. We have some unique advantages that allow us to earn these attractive returns, such as our presence in growth markets and our 25 gigawatts of development pipeline, including land and interconnection rights, our ability to bring low-cost capital to optimize AES's return on equity, and our relationship with key customers, including those for whom we are implementing our green blend and extend product. Now to slide seven. As of the end of last year, our backlog of projects with signed PPAs was 6.1 gigawatts, half of which was under construction. Approximately 80% of the total, or 4.8 gigawatts, is renewables, split among hydro, solar, wind, and energy storage. In terms of the 3 gigawatts that was under construction, I am pleased to announce that the 1.3 gigawatt Southland Repowering Project achieved commercial operations on February 6th. This project was completed ahead of time and slightly under budget and is helping support the reliability of the grid in Southern California. The remaining 1.7 gigawatts under construction are renewables and energy storage. The majority of these projects are expected to come online in 2020 and the remainder in 2021. In addition to our 6.1 gigawatt backlog and the 2 to 3 gigawatts of annual renewable PPAs that we expect to sign, we see opportunities for attractive investments that are not currently included in our forecast, such as further rate-based growth, at DPL and IPL, as well as more renewables and energy storage. Turning to slide nine, another example of how we're achieving sustainable growth is AES-GENER, which is one of our most important businesses. AES-GENER is transforming its portfolio by growing its wind and solar businesses and strengthening its balance sheet. Under its green blend and extend strategy, AES-GENER is negotiating new long-term renewable PPAs with existing customers which preserves the value of its thermal contract and creates incremental value with long-term contracted renewables. Customers receive carbon-free energy at less than the marginal cost of thermal power, enabling them to meet their sustainability goals and affordable energy needs. In 2018, ASNR announced its Green Blend and Extend strategy, and today I am pleased to report that since then it has executed 2.5 gigawatts of long-term renewable contracts, the majority of which were signed in the last 12 months. As a result, ASNR has significantly diversified its generation mix and has positioned itself to deliver attractive long-term growth. Specifically, these new contracts will more than double its renewable capacity and largely offset the roll-off of legacy contracts in Chile through 2024. In Colombia, ASNR is successfully expanding from a single hydro asset to a broader portfolio, which will include wind and solar. ASNR will primarily serve its green blend and extend contracts through a combination of 1.6 gigawatts of new renewable capacity and its existing portfolio. We expect these new projects to deliver mid-teen returns to AS. In addition to this new capacity, the Alto Maipo Hydroelectric Complex will be substantially completed by the end of this year and will help supply these new PPAs. Gustavo will discuss how ASN Air will fund the 1.6 gigawatts of new investments, including AS's participation. Now to slide 10 and the second theme of our strategy. In addition to growing our core infrastructure business, we're also developing new solutions to meet increasing customer demand for 24-7 renewable power and greater energy efficiency. Our focus is on solutions that are scalable and relatively capital light, which allow us to work with our customers to co-create applications that meet their most critical energy needs. A key platform for us in this area is our energy storage business, Fluence, which continues to be the global market leader. Through this partnership with Siemens, we are well positioned to benefit from the expected 15 to 20 gigawatts of annual growth in energy storage globally. Today, we're already seeing that nearly half of all solar projects in the U.S. include a storage component. In 2019, Fluence won contracts for 961 megawatts and has tripled its backlog since 2018 to a record of 1.2 gigawatts. which equates to roughly a billion dollars in revenue. Fluent is cash and margin positive and is continuing to expand its capabilities, including modular, prefab, and solar DC coupled products to address new market opportunities. Across all of our platforms, we've also been incorporating innovative applications. An example is the 10 megawatt, five hour duration energy storage facility at ASN Air's Alfalfal hydro plant in Chile. This groundbreaking project will serve as the first virtual reservoir in the world, providing the run of the river plan with capabilities similar to a traditional reservoir. AES and AIR expects to inaugurate this project in March, and it has the potential to increase this virtual reservoir by another 240 megawatts. Turning to slide 11, last quarter we announced a strategic alliance with Google to collaborate on innovation across our business lines. We're actively working together to develop new solutions to accelerate a broader adoption of renewables and energy storage and to improve the experience of corporate customers. This alliance also encompasses energy management and opportunities to develop, own, and operate projects in targeted markets to help Google meet its clean energy objectives. Now to slide 12. Our strategic investment in Uplight continues to grow rapidly. As a reminder, Uplight provides utilities with a suite of digital services, including an online marketplace. These solutions improve end customer experiences while helping utilities balance energy demand and reduce service costs. This business now works with over 80 electric and gas utilities and reaches over 100 million households and businesses in the United States. Uplight has over $100 million in sales in 2019 with solid margin and continues to fund growth without additional equity needs. We see Uplight as very well positioned to benefit enormously from continued growth in cloud-based digital solutions in all aspects of energy management. Finally, turning to slide 13 and the third theme of our strategy, superior results. As we invest in sustainable growth and offer innovative solutions to our customers, we are transforming our portfolio while achieving superior financial results. In late 2019, we received our first investment grade rating and expect that we will receive another investment grade rating this year. Additionally, through 2022, our portfolio is expected to generate $3.4 billion of discretionary cash, which we will invest to continue to deliver double-digit total returns to our shareholders. This return includes our dividend, which has grown by 30% over the last five years, and we expect it will continue to increase by 4% to 6% annually. Having the right energy mix is key to our future success. This morning, we announced a target to reduce our generation from coal to below 30% of our total volume by the end of this year. Furthermore, we expect to reduce generation from coal to less than 10% of our total by 2030. We are also committed to providing timely and accurate ESG data. We were the first U.S. investor-owned company in our sector to publish a climate scenario report consistent with the recommendations of the Task Force on Climate-Related Financial Disclosures. Additionally, we currently provide a substantial portion of the disclosures recommended by SASB and expect to provide virtually all of the remaining data by the end of this year. We're beginning to see the benefit of attracting a wider investor base that appreciates AES's growth in clean energy and innovation while maintaining consistent financial performance. Before I turn the call over to Gustavo, let me address the issue of COVID-19 or the coronavirus. As a long-term contracted generator, overwhelmingly in U.S. dollars and the U.S. utility business, we see limited impact from most likely scenarios from the coronavirus epidemic. Furthermore, as I have previously laid out, AS has a strong pipeline of contracted, mostly renewable projects that ensure our growth over the coming years. Although we may suffer some delivery delays, Both our solar and energy storage businesses have largely secured their supplies of lithium-ion batteries and photovoltaic cells for this year. We will continue to closely monitor the situation and take proactive measures to ensure the resiliency of our business. With that, let me turn the call over to Gustavo to discuss our financial results and capital allocation in more detail.