The AES Corporation

Good day, and welcome to the AES Corporation First Quarter 2020 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, you may press stars and one on your touch-tone phone. To withdraw your question, please press stars and two. Please note that this event is being recorded. I would now like to turn the conference over to Ahmed Pusha, Vice President of Investor Relations, please go ahead.

Thank you, and good morning, everyone. Welcome to our first quarter 2020 financial review call. Our press release, presentation, and 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, which are discussed in our most recent 10-K and 10-Q file with the SEC. Reconciliations between GAAP and non-GAAP financial mayors can be found on our website along with the presentation. Joining me this morning are Andres Kluski, 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 first quarter financial review call. Today, I will discuss the current state of our business and our strategic goals going forward. We are well positioned to withstand the effects of the COVID-19 pandemic and are seeing the benefits of our multi-year effort to enhance the resilience of our business. The vast majority of our earnings come from long-term contracted generation, which provides significant protection from the downturn in electricity demand and prices. Furthermore, our liquidity position is strong, we have no major near-term debt amortizations, and we continue to improve our investment-grade metrics. Our construction projects are progressing on schedule, without any supply chain disruptions, and we are on track to grow our renewables backlog and achieve our environmental goals. The net effect of all this is that despite seeing double-digit reductions in demand in some of our markets, we are lowering our earnings guidance for the year by only 5%, the range of $1.32 to $1.42. We are reaffirming our expectations for 2020 parent free cash flow and our longer term growth projections for both adjusted EPS and parent free cash flow. Gustavo will provide an overview of our first quarter financial results, our liquidity, and our guidance in more detail. Turning to slide four, today I will focus my discussion on the three core themes of resilience, sustainable growth, and leadership in innovation. Beginning on slide five with resilience. These are certainly unprecedented times with a global pandemic and a sharp economic downturn resulting from restrictions on travel, mobility, and work. Fortunately for AES, as you may recall from our last quarterly call, we were closely monitoring the spread of COVID-19 and taking steps to reduce its impact on our business. We began to implement our plans for all non-essential personnel to work remotely by the first week of March, increased our stocks of fuel and PPE at our plants and work sites, and built up cash liquidity at all levels of our portfolio. We also ensured that national and local governments recognized the critical importance of the service we provide and classified our operations as essential, facilitating the movement of personnel to our generation plants, utilities, and construction sites. As a result of all of these early actions, we have continued to deliver our services without any significant impact and have minimized contagion among our people and contractors. To date, Only 10 AS people out of a population of 9,000 have tested positive for the virus. And more importantly, none have become seriously ill or hospitalized. Of these, five have been deemed recovered and virus-free. Turning to slide six, our resilience comes not just from our actions to address the crisis, but from our fundamental business model. Across our portfolio, we have an average remaining contract life of 14 years. Approximately 70% of our business is long-term contracted generation with the vast majority in US dollars or euros. Nearly all of our off-takers are investment grade and our contracts are primarily for capacity with our revenue relatively unaffected by the actual energy produced. Thus, this part of our business is very resilient to a downturn in energy prices and demand. We have an additional 15% of our business, which is generation with shorter term contracts, which has some modest exposure to spot prices. The remaining 15% of our business is regulated utilities, principally in the US. And this is where we have been most impacted by the decrease in demand. We saw a net reduction of around 10% in April. mainly from commercial and industrial customers, and we expect lower demand to continue for several months before recovering by early next year. We are taking measures to offset the reduction in 2020 earnings, primarily through cost savings that we are realizing from our digital initiatives. For example, investments we have made over the past few years have made it possible for much of our staff to work remotely, including many positions on the operational side. We expect some degree of remote work and the associated benefits to continue even in the post-pandemic world. Through these and other initiatives, we expect to deliver additional cost savings of around $50 million this year, which Gustavo will cover in more detail. Now let me turn to slide seven and our second theme, sustainable growth, which continues to be a key area of focus. Despite the current crisis, We remain on track with our current growth projections and ambitions to triple our renewables portfolio by 2024 versus 2016. Our backlog is now 5.3 gigawatts, of which 1.8 gigawatts are currently under construction. Turning to slide eight, construction includes the 531 megawatt hydro at Alto Maipo in Chile, which continues to progress according to our prior schedule. Phase one is now more than 93% complete. The turbines are in place and only 2.7 miles of tunneling out of a total of 46 remain to complete phase one and start operations early next year. Of our more than 30 renewable projects under construction, only two small ones have been affected to date by the COVID-19 lockdown. Both are in upstate New York where we had to temporarily stop work. Fortunately, as you may recall from our fourth quarter call, we took very early steps to ensure we had solar PV panels and our balance of plants in country and at our construction sites as we foresaw potential supply chain bottlenecks in China and Korea. Turning to slide nine, I am pleased to announce the start of commissioning of the world's most efficient solar project, Andes Solar in Chile. which at 37% has the world's highest capacity factor as a result of using bifacial PV panels and the high solar irradiation combined with the low temperatures of the Atacama Desert. Building on our innovation in solar, we are bringing a new prefabricated PV design to our projects, starting with an initial 10 megawatts in Chile. We are finalizing a strategic partnership with a company that has a patented design that not only allows for construction to be completed in half the time, but can also double the energy output per acre versus today's best in class project designs. We expect to expand this solar PV technology to many of our projects in the future to allow for faster construction, more efficient use of land, and new CNI offerings. Regarding new PPA sign, so far this year, we have added approximately 700 megawatts of new renewable PPAs to our backlog, mostly in Chile and the U.S. Thanks to our leadership and innovation, we continue to see mid-teen levered returns on our renewable projects at the standalone project level. We are on track to deliver between 2 and 3 gigawatts of new renewable PPAs this year, and growth in demand for smaller projects in the U.S. remains especially strong. In Chile and Colombia, our green blend and extend strategy has resulted in 2.5 gigawatts of new PPAs and the construction of 1.6 gigawatts of new renewables. Now on to slide 10. In addition to wind and solar, our energy storage business also continues to grow rapidly, both through our own projects and through Fluent, our joint venture with Siemens, which sells energy storage systems to third parties. Both aspects of our business are benefiting from an acceleration in demand for battery-based systems. Today, about half of our solar bids in the U.S. include an energy storage component. New markets in application also continue to emerge, such as Virginia's 3.1 gigawatt energy storage mandate and Germany's plan to add up to 6 gigawatts to support the transmission network. Even in the midst of the current crisis, In early April, we signed a 15-year PPA for 100 megawatts of four-hour duration energy storage in Southern California through S-Power. I'm also very proud that we will soon be commissioning the world's first virtual reservoir at the Alfalfa Hydro Complex just outside Santiago, Chile. This virtual reservoir consists of 10 megawatts of five-hour batteries, which allow for dispatching the run-of-the-river hydro largely at night when solar power is not available and energy prices are higher. We will be increasing this virtual reservoir to 250 megawatts over the next couple of years, and there are several smaller virtual reservoir projects in late-stage development in the U.S. Fluence currently has an all-time high of 1.3 gigawatts of energy storage systems under construction, which includes some of the largest projects in the world, This year, we will be rolling out our sixth-generation energy storage technology platform. It is both factory-assembled and modular and will improve reliability, increase the speed of execution, and lower costs. Through our growth in renewables and energy storage, we continue to make progress towards our ambitious environmental goals. As you can see on Flight 11, we remain committed to reducing our cold generation to less than 30% of our gigawatt hours by the end of this year, which will make us compliant with ESG standards set by Norges Bank, among other institutions. We expect to realize this target through the continued sale and decommissioning of coal plants, along with the execution of our extensive backlog of renewable projects. Finally, turning to our leadership in innovation on slide 12, we continue to move forward on a number of innovative solutions that we see as highly relevant for the long-term future of the industry. One example is Uplight, which, as a reminder, works with more than 80 electric and gas utilities in the US, reaching more than 100 million households and businesses, providing a suite of digital solutions. We expect revenue growth of 30% this year, fueled in part by utilities' desire to improve customers' experiences in a capital-efficient, digital way. Another example of our innovation is our partnership with Google, which is progressing well. We continue to make headway on a number of initiatives that we will be in a position to announce in the near future. Now, I would like to pass the call to Gustavo Pimenta, our CFO, so he can provide more color on our results, debt profile, and guidance.