Welcome, and thank you for standing by. [Operator Instructions] Today's call is being recorded. If you have any objections, you may disconnect at this time. I'd now turn the meeting over to Ahmed Pasha. Sir, you may begin.

Thank you, Tim. Good morning, and welcome to the Second Quarter 2013 Earnings Call of The AES Corporation. Our earnings 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 Gluski, our President and Chief Executive Officer; Tom O'Flynn, our Chief Financial Officer; and other senior members of our management team. With that, I will now turn the call over to Andres. Andres?

Thanks, Ahmed, and good morning, everyone. Today, I will focus my comments on 3 areas: Our operating performance and progress on our strategic objectives during the second quarter; an update on a couple of our key businesses; and a review of our most important initiatives to maximize the value of our portfolio. Turning to Slide 4. Our financial results for the quarter were in line with our expectations. We increased our adjusted earnings per share by $0.14 to $0.32. Our continued focus on improving operational performance and reducing corporate overhead contributed significantly to our results for the quarter. We achieved these results despite a $0.05 impact from the worst hydrology in Latin America in many decades. With our year-to-date results, we're on track to achieve our full year guidance on all metrics. Tom will discuss our financial performance and guidance in more detail. In addition to solid financial results, we made continued progress towards our 3 main strategic objectives. Turning to Slide 5. Our first strategic objective is to improve profitability. As you may remember, we committed to a reduction of $145 million in overhead cost by 2014 relative to 2011. During the quarter, we reduced our G&A expense by another $15 million from last year. Based on our progress so far, I'm pleased to report that we have accelerated our efforts and expect to achieve $135 million this year, which is $15 million higher than our prior forecast. Over the last 2 years, we've reduced our G&A by more than 1/3. Our second strategic objective is to narrow our geographic and business focus. As you can see on Slide 6, since May, we have sold 2 additional assets for net equity proceeds of $56 million. We sold our 10% stake in a gas-fired plant in Trinidad, which was not…

Thanks, Andres, and good morning, everyone. We're on track for the year, and we're reaffirming our guidance on all metrics. Today, I'd like to review our second quarter results, including adjusted EPS, results by SBU and proportional free cash flow, then I'll discuss our 2013 guidance and capital allocation updates. Turning to Slide 12. Hydrology has been a challenge across several of our SBUs. On a proportional basis, 12% of our installed capacity is hydro. We've seen very dry conditions in many of our markets. During the second quarter, we had a $0.05 drag and poor hydrology across our portfolio, including in Panama, Colombia, Chile, Brazil and Turkey. This brings our year-to-date impact from poor hydrology to $0.08 per share. The situation has improved, but based upon current reservoir levels, we expect another $0.04 impact in the second half, bringing the full year hydrology impact to $0.12 a share. This is an increase of $0.06 relative to our expectations as of the end of the first quarter. We are, however, seeing some recovery. Hydrology and reservoir levels in Brazil are nearing a normal range at this point. It's currently the rainy season in both Panama and Colombia where water inflows are roughly 20% to 30% below historical levels, that we've seen some improvement in Colombia over the last few weeks. Critical point is that we're offsetting these impacts with other opportunities in our portfolio and reaffirming our guidance. I'll touch on the specifics in a moment. Now to Slide 13. Adjusted EPS increased $0.14 for the second quarter. Net of the $0.05 impact from dry conditions, operational improvements at the SBUs contributed $0.05, driven by Gener in Andes, Uruguaiana in Brazil and the Dominican Republic and El Salvador businesses in MCAC. I'll cover the specifics of each SBU, but first,…

Thanks, Tom. Operator, we'll now open up the line for questions.

[Operator Instructions] Our first question will come from Jon Cohen from the ISI Group.

So a couple of things. First of all, there's been some reports in the press about you looking to exit your stake in Cameroon. So now, I'm sure you don't want to talk too much about it, but can you give us a sense of just some of the high-level financial metrics there, maybe like book value and contribution at PTC?

Yes, of course, I can't comment and I haven't. A lot of our -- none of our possible asset sales, we sort of laid out how we look at businesses and how we sell them. I would say that the -- that is within the EMEA region, and it's a relatively modest contributor to earnings and a very small contributor to our parent operating cash flow or dividends back to corp.

Okay. And then my other question, so it looks like you're at $500 million for proportional free cash flow for the year, which is almost half of the top end of your range. And you said that most of your earnings and cash flow from ops are going to be back-end loaded. So can we infer from that, that you'll do -- you could do better than the top end of the range for your proportional free cash flow, and what would that mean to the parent free cash flow?

Yes, I would say that the parent free cash -- I mean, no, we're not going to -- as we're saying, we're staying within our guidance at this point. But as Tom indicated, we were doing better on the cash metric.

Yes. I think, Jon, I said it's the proportional free cash flow. I think I'd say that proportional free cash flow, we just stay with the ranges we have. I think the parent free cash flow, we're actually more conservative with that range going out at the start of the year, so we're now focused towards the top end of that range. And as we consider dividend policy later in the year, that's an important baseline.

Okay. And lastly, can you just give us a sense of what the rate -- long-term effective tax rate is? So it looks like this year, your earnings are going to benefit about $0.11 versus last year from tax. Is that something that should reverse over time? Or can we assume that your tax rate is going to stay close to where it was [indiscernible]?

What we have in our long-term projections is low 30s. And so -- yes, this year in particular. This is very much effective from where the earnings come. So the earnings, for example, Brazil is having lower earnings, that is a high tax jurisdiction. If you have more earnings, for example, coming from Chile, that's a low tax jurisdiction.

Yes. So I think, Jon, you're right. I think as we look at sort of a run rate cutting through the differences, if next year is a normalized year on a similar path of earnings, we'd be about $0.10 to $0.12 higher in taxes.

Our next question comes from Ali Agha from SunTrust.

Andres, listening to your comments, particularly on the cost reduction front, the fact that you will be running ahead of plan this year, how should we think about the fact that, that $145 million target through '14 could end up being conservative? I mean, what's your confidence level that it will go up? And related to that, in the past, you've talked about the fact that even though you're officially looking at 4% to 6% EPS growth, your aspiration would be to get it back up to 6% to 8%. What's your confidence level on doing that, and when could we start to see signs of that happening?

Okay. I think in the first part of the question, how do we feel about our overhead cost reduction target. And first, I want to say, this is our overhead cost reduction targets. We're doing a lot of other things in the businesses. So first, yes, we feel confident that we will exceed the $145 million. We'll give you more exact indication how far we think that will go when we update our guidance for next year, in the fourth quarter, after we've finished our budget. And regarding the second question, as we said, we'll work very hard to exceed the sort of total return, as we set out at 6% to 8%. But we are facing significant headwinds. The dry hydrology this year is, in many cases, the worst the country's experienced in 70 years. And what's been very unusual is that the north of Latin America and the south of Latin America were correlated, which is usually they're not correlated, they're going opposite directions. As well as FX and commodities, but we remain committed to try to exceed this goal.

Okay. Second question. I know you guys had looked at this, potentially IPO-ing your solar assets in Toronto, pulled back on that. Since then, there's been excitement about this so-called yield cost structure. Other companies have tried it, and that seems to have been accepted well by investors. What would be your appetite for a structure like that? And what's your thinking on your portfolio in a yield-curve-type format?

Well, what we think -- again, the process that we're in now of bringing in partners on our projects and our businesses, especially financial partners, we're allowed to operate and really extract the synergies and economies of scale is the way to go. Now regarding the solar, we did look at a yield base, in sort of a yield curve on solar. We still have Mount Signal in construction, which is 260 megawatts of solar in Imperial Valley in California. And so, really, it was not completed. We weren't happy with the price and wait until there's less sort of construction risk and revisit this. So what I can say is that we're looking at all possible ways of getting the most value out of our footprint and out of our assets. That's really what we think it's all about. This is a capital-intensive business. And what we want to do is at each -- we have an unmatched footprint. We have a very good brand names, we have very good contracts, very good assets, it's really how can we maximize the returns from that invested capital. I don't know, Tom, do you want to add something?

No, I think you said it well, Andres. I'd say we do look at ways that we can attract capital at more attractive levels. We certainly do at the project level with partnerships that Andres has touched on. We did look at the solar situation in the North and thought it was a good concept, we just weren't comfortable with the value. It may look better in the future once Mount Signal gets online. But...

Okay. Last question. Just to be clear on the asset sale goals you've talked about, so you've done about $234 million year-to-date. Did I hear you right that you still expect to do $500 million by the end of this year? And then the $900 million number you've talked about, is that incremental to the $500 million? Or does that incorporate the remaining portion of that $500 million?

Sort of the 2 parts of the question. First, yes, we remain optimistic that we can reach the $500 million in net proceeds to AES this year. And when you talk about the $900 million -- when I talk about the $900 million, that's up and above the $230 million that has already been closed this year.

Okay. So the starting point is after what has been done so far this year?

That's correct. And if you remember, when we first started talking about it, we always said there was a universe around $2 billion. And what we're saying at this stage is that we feel confident that we can reach that -- from now to the next 2 years, complete this and hit the $2 billion figure.

Our next question comes from Julien Dumoulin-Smith from UBS.

So quick first question here on the Gener funding of the equity layer, I suppose, later this year, is that really due to the Alto Maipo sale, and just kind of keeping your stake at a comparable level as it is today?

No, Julien. It's Tom. It's really more -- Alto Maipo is on track. The partnership is very consistent with our expectations and what we've worked on for the last 6 months. It's really how Gener fund their equity piece into Alto. And we're looking at some scenarios that would have some non-equity which could reduce the Gener new issue common into the market.

Ultimately, would you keep the existing stake that you have in Gener with the $100 million?

Yes, that's our expectation. So when you said up to $100 million, that would be roughly 70% of the deal, so that would assume that Gener would do an equity deal of $150 million, $175 million, something like that. Appreciate it's still work in process, but it also impacts how we see relative values. And so even if Gener went a little larger than we can subscribe to up to 70%, we can also dial it back if we want.

Yes. And I'd like to add there, the way we're looking at the portfolio is that we really target even in the sense that through something like this, emission of shares at Gener, we can target the exact amount that we want and so -- also buy some of the sell-downs, so we'll be doing partial sell-downs. So what we're doing is really optimizing our portfolio and seeing where we get the -- we feel the best returns. Of course, it's a strategic objective of controlling these companies so that we can really extract the synergies from having this global portfolio.

Great, excellent. So perhaps the next question, just going back to the discussion on asset sales and partnerships. Just if you can provide some sense of magnitude for what these potential partnerships could yield in any kind of metrics, if you will, but just a little bit more detail there.

Well, that's a little bit tough. And as you know...

Do you have a target maybe or anything like that, that you want to throw out there?

What I would say, in the number I gave you, the $900 million, some of that could be partial sell-downs than the $200 million that we are -- or $900 million that we're going to do over the next 2 years. So part of that could be partial sell-downs, and we could sell down at various levels. And again, the basic idea is to be able to tailor the risks that we want in markets that we want in technologies. So for example, take something like Alto Maipo, we want half of that project, because that's what we feel would be optimal for Gener and for us. And the same thing is the decision between Cochrane and Alto Maipo is to be able to do both projects. So as Tom mentioned, we will look at what's the optimal mix of partnerships and new equity, for example, into Gener.

Great. And then lastly on Bulgaria, I mean, you talked about preserving the contract value. And I know it's a little tough to talk about it right now, but what are those potential avenues, if you can talk about it at all, frankly.

Just to give you a sort of -- we have a great asset there. It's the only major plant in Bulgaria which is EU 16 compliant, very good contract. There's some things going on in Bulgaria, we're on top of that. I think Andy can comment a little bit more on the specific actions.

Julien, it's Andy Vesley. I really don't want to talk about all kind of options because quite honestly, our discussions associated with...

Andy, I'm not sure we can quite hear you.

Sorry, Julien. It's Andy Vesley. In terms of what's going on in Bulgaria, as you know, what's driving all these issues are the perception of the high energy prices, and that's retail energy prices. And as you may be following, when the new government came in, they reduced distribution tariffs by 7%, and that was done by impacting the distribution companies' distribution value added. August 1, they've come out with a new regime, basically reducing energy prices again by 5%, and that is going to other generators and not those who have PPAs like AES. The real issue that we're focusing on the moment is with our offtake in NEK and their liquidity because the primary focus for us right now is making sure our accounts are current. So we're in constant discussions. We had very productive discussions. They are working very hard to find ways of continuing to meet their obligations to us. At the moment, that's where our discussions are. And it's a changing situation. The Bulgarian government has taken a lot of steps in the sector, a lot of focus on NEK and how it's structured. So at this point, it's our relationship with NEK, which is in front of us, and the most immediate issue is to make sure that they continue to meet their obligation in paying for the energy that we provide them. So that's where we are at the moment. And as this goes forward, we'd be happy to update.

Great. And then actually, just a quick one on Uruguaiana in Brazil, any update on re-contracting there?

On Uruguaiana, in terms of the actual operations of the plant, we operated for 2 months, and we expect to probably get it back up in September. This has to do with the Brazilians, as you know, because of the drought, they have managed their reservoirs very well and have been requesting a lot more thermal into the system. Now some of that, of course, has been socialized across all the generators, including Japan, that's affected somewhat the results. But yes, we do expect to be operating it once again, probably in September.

And that would be on a go-forward basis, just from a modeling perspective? Would that be...

Well, we're not ready to say that yet. I mean, the real issue becomes -- right now, in Brazil, as you know, they're still using a lot of thermal generation. So the ability to have Uruguaiana available to provide supply to help rebuild the reservoir levels is essential. And actually, the Brazilian government had said that. The real issue becomes the relationship between Brazil and Argentina and getting the gas. As you remember, the last time when we restarted the plant, it was Brazilian gas transported through Argentina. So there are a few pieces that have to work. Those conversations are ongoing, they're active, and we're very hopeful that we will not only be able to get the plant back, as Andres said, in an emergency situation, whether this year, but as we resolve the YPF situation, we'll have a long-term commitment.

Yes. That's good to clarify. I mean, when I say September, on the month of September, our goal is to have it long-term available, constantly available, and receive capacity payments, et cetera. And we do have very good relations with both governments, and we're in conversations and we're optimistic this will happen.

Our next question will come from Charles Fishman from Morningstar.

Just a follow-up on that last -- or one of the previous questions on Bulgaria. What is your total exposure right now to NEK?

Our total exposure is about, let's say, 5% of our total PTC, pretax contribution. And I would say that our exposure, as you can see in the Q, is about $80 million in terms of, let's say, accounts receivable that are past due. But I'd say that that's basically -- on book value, I think it's somewhere around 590...

But we focused on the PTC number, so a little over 100, 110, something like that.

Yes. But just to put it in context, as Andy said, I mean, right now, our focus is really on making sure we maintain the receivables at this level. The plant is operating very well, and the issues that the sector is facing in Bulgaria have a lot -- really are driven by this. It has to do with some of the legacy plants, increasing their exports of energy, and they've taken the right steps. So it's a question of strengthening any case cash flow more than anything else.

You've had a contractual issue with the contract around that plant at one time. Is that still in arbitration?

We didn't -- well, we basically did have an issue with a contractor on that. And I think Brian can comment on that.

You're correct. It's still in arbitration, and the hearing is scheduled for later this year and the beginning of 2014.

Just roughly, what's your exposure on that?

Well, I'd say, our exposure, I mean, basically, it's -- we have, let's say, the funds that were put up for, let's say, losses caused by the contractor, I think are about -- well, about EUR 90 million to EUR 100 million, and that we feel our exposure here is minimal in terms of -- if any. Because what happened is that we asked them to exit the construction site and we completed it ourselves with some assistance from some technical firms, and we did get it up to nameplate capacity. I don't know, Brian, you can -- want to comment any more on that?

No, it's accurate. And obviously, it's in arbitration, so we need to be a little less talkative about the issue.

Next, we have Gregg Orrill from Barclays.

I was wondering if you could touch on parent free cash flow and how you see that trending into 2014 and ongoing? I know you said you are looking at the top end of the higher part of your guidance for this year. And then within that, just a couple of drivers, I know you said the parent interest was on a run rate reduction of $50 million, and how that compares to your expectation, and whether you can increase those savings going forward. And then lastly, on the MCAC region, I think you had some spot sales there, just how that's tracking relative to your PTC ranges from the Analyst Day and going forward.

Gregg, let me hit -- try those. From a parent free cash flow, I think our range for this year, $400 million to $500 million, was conservative. And as I said, we're more comfortable with the higher end of the range. You may remember last year, the number was about $520 million, $525 million. I think $500 million is a generally good run rate for us. We haven't got a specific number for next year, in '15, but that's a generally good number, maybe $450 million to $500 million. As we look out longer term, with some new plants coming online, especially Mong Duong, which comes on later in '15, we do think '16 and thereafter, we'll have some good ability for us to grow off of that base, if you will. But certainly, as it impacts dividends, as we've talked, we think we can grow into a range and then grow the baseline on a longer-term basis. Andy, I don't know if you want to touch on the spot sales...

Gregg, could you clarify the question? I didn't hear it very well, for Andy. The second part of the question regarding MCAC.

The second part of the question is related to just how you were trending relative to the PTC guidance on MCAC and how you see that business going forward.

Yes. Gregg, maybe I'll just say that I think MCAC was still in the range, trending towards the lower part of that -- some meaningful offsets from Panama where we have said had some improved results out of the Dominican Republic. So it's still -- we're still below the midpoint in MCAC, but the DR is done well and I think benefited from some market conditions there.

And then on interest expense going forward, additional savings and how it's coming in versus expectations?

Yes, I think we will have some -- the interest savings that we're seeing this year, we'll have some continuation of that. I think it's in the 30-ish range, maybe $0.03 to $0.04, Gregg, from a bottom line EPS impact.

Next question comes from Brian Chin from Merrill Lynch..

Could you give us a little bit of update on Indianapolis Power & Light? Two things, one, I know that the CCGT decision is still early 2014, but any sort of color on updates on that? And then secondly, could you give us an update on the environmental retrofit settlement agreement, did the commission decide on that, what's the latest on that?

Okay. I think Andy can certainly can update you on the first part.

Yes. Brian, it's Andy Vesley. In terms of the CCGT, where we are in the process is we do expect, as you know, we filed for the CPCN almost a year ago, and we do anticipate getting a decision out of the commission on it this month, and we expected it to be on the last agenda. It wasn't -- well, we do anticipate it being at the end of this month. We don't anticipate any difficulty, and we were not aware of any issues that will come up. So we believe we'll be moving forward with that as per our schedule and as we've discussed before. In terms of the second part of your question, maybe if we're talking about -- are we talking about the MATS investment?

Certainly, it's the MATS.

Yes, I was thinking of the retrofits and settlement agreement that had been reached between Indianapolis Power & Light and the consumer groups. I think I have in my notes here that a decision by the commission was expected some time around the middle of this year, but maybe I've got my notes wrong. I just wanted to [indiscernible] right update.

Yes. Brian, I'm going to have to say that I'm aware of those ongoing discussions. I know that there had been a lot of proposal put back and forth. I am not aware that we have a decision, so we'll have to update you because I don't have any new information on that.

Okay. Okay, fair enough. And then second topic, I believe you said in the prepared remarks that the share buyback that's been done so far leaves about 237 million left that's been authorized. Is that correct?

That's correct.

Okay. Based on the run rate of how much you guys have been buying back in terms of shares, that leaves about another year or so of share buybacks, if you just use the same run rate. Should we expect to see at some point over the next, call it, 2 or 3 quarters, an increase to the authorization amount, just to give you guys the flexibility in the event that shares do decline?

Yes. As I've always said, the authorizations are really no issue in terms of us getting authorizations. The question is, as we make our capital allocation plans as we decide to do different things. So as I've said in the past, this is -- we have it. It's on the shelf. We can use it as we feel it is appropriate. If, for any reason, we wanted to exceed that amount, and of course, we could go back to the board and discuss it.

Our next question will come from Paul Patterson from Glenrock Associates.

Most of my questions have been answered. But just back on comments you guys made on Bulgaria in terms of aiding any case, cash flow or liquidity, could you just elaborate a little bit more on that? I did notice that the receivables obviously rose and such. But what sort of -- how would you guys could be -- what has actually sort of contemplated with respect to that, if I understood that correctly?

Well, I think the most -- again these are decisions of the Bulgarian government, but there's certainly -- one of the things that NEK has faced is some relatively high export taxes, and just kind of lowering some of those export taxes to allow them to export more energy into the area and get more revenues from that. And also, it's a question of some of the legacy costs that they have from some of the less-efficient plants. I don't know, Andy, do you have anything to add really to that?

Yes. Paul, Andy Vesley here. The only thing I would say is that the liquidity issue in NEK is being worked by the government and the sector, and the new regime are looking for a lot of nonenergy cash visibility in NEK. Their laws have been changes in the taxes on energy. But let me put it into some perspective. I think our accounts are about $84 million, of which, 75% are less than 60-day aged. We've been in this situation with them before, and we've always been able to come to an arrangement. Without going to too much detail at the moment, we've received a letter from NEK basically with the proposal that would make them whole rather in the first quarter and a payment scheme. So everything seems productive there. And of course, it very much depends on a lot of this new regime coming into place, but the relationship we have, in any case, is very positive, it's very open. We meet with them regularly. We have solved this type of issue in the past, and we're trying to be as flexible as we can so we can have a long-term solution. They have an issue. Everybody's working on it. We want to be part of that solution. And given the past performance of NEK and our contacts with the government, we feel we're back on the path to having a resolution. And as that becomes firm, we'll be able to update everybody on it.

Okay. That's great. And then just on the 587 [ph] of net equity, that's the total exposure, is that right? There's no -- you guys don't have any parent guarantees or anything else with respect to the Maritza or whatever? Is that...

Yes. No, that's correct. It's all nonrecourse financing.

No other questions are in queue at this time.

Okay. Well, thank you, operator. Before we conclude today's call, let me reiterate that we are reaffirming our guidance, that we continue to execute on our strategic plan, that we will continue to reduce cost and rationalize our portfolio. As we've previously laid out, we are maintaining a balanced approach to allocate capital towards deleveraging, returning cash to shareholders and investing in platform expansion to maximize risk-adjusted returns. We look forward to seeing you in the near future. And with that, I will now turn the call back to Ahmed.

Thanks, Andres, and we thank everybody for joining us today. As always, the IR team will be available to answer any questions you may have. Thank you, and have a nice day.

Today's call has ended. Please disconnect at this time.