Good morning. And welcome to the AES Corporation's Fourth Quarter 2018 Financial Review Conference Call. All participants will be in listen-only mode [Operator Instructions]. 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, Carey. Good morning. And welcome to our fourth quarter and full-year 2018 financial review call. Our press release, presentation and related financial information are available on our Web site 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 Andrés Gluski, our President and Chief Executive Officer; Gustavo Pimenta, our Chief Financial Officer; and other senior management of our management team. With that, I will turn the call over to Andrés. Andrés? Andrés Gluski: Thank you, Ahmed. Good morning, everyone. And thank you for joining our fourth quarter and full-year 2018 financial review call. 2018 was a good year for AES, demonstrated by our strong financial results and excellent progress towards achieving our strategic goals. We delivered on all of our commitments, including our financial guidance and hit key milestones on our strategy positioning AES for long-term sustainable growth. Some of our key accomplishments last year were; we reached the high-end of our expected ranges for both earnings per share and free cash flow; we achieved a key investment grade financial metrics one year ahead of our plan; we met our expectation of signing long-term PPAs for 2 gigawatts of renewable capacity and increased our backlog to almost 6 gigawatts; we accomplished key milestones on our 4.4 gigawatts under construction and completed construction of an additional 1.3 gigawatts; we introduced a longer term target to reduce our carbon intensity by 70% from 2016 through 2020; we now expect to achieve a 50% reduction by 2022; and our world leading battery-based energy storage joint venture with Siemens, Fluence, was awarded 286 megawatts of new projects…

Thank you, Andrés. Today, I will go over our 2018 results, including credit profile and capital allocation. I will conclude by addressing our guidance for this year and expectations through 2022. As Andrés mentioned, we finished 2018 on a strong note, achieving the upper end of our expected ranges for all metrics and setting a solid foundation for growth through 2022. As shown on the Slide 20, adjusted EPS was $1.24, reflecting higher margins from our businesses, particularly in the U.S. and utilities and South America's strategic business units or SBUs, as well as debt pay down at the parent. These positive drivers were partially offset by asset sales in the Philippines and Kazakhstan. Turning to Slide 21, adjusted pretax contribution or PTC was $1.2 billion for the year, an increase of $160 million. I will cover our results in more detail over the next four slides, beginning on Slide 22. In the U.S. and utilities SBUs, higher PTC was primarily driven by DPL, which benefited from higher rates following the resolution of its rate case. Results also reflect high contributions from our U.S. solar business and an extended summer run at our Southland plant in California. Increased PTC at our South America SBU reflects higher contracted pricing in Colombia, as well as higher tariffs in Argentina following the 2017 results. Results also benefited from higher contracted sales and lower interest expense at AES Gener in Chile. Higher PTC at our Mexico, Central America and the Caribbean, or MCC SBU reflects a full year of operations at the DPP combined cycle expansion and higher spot energy prices in the Dominican Republic. Results also reflect the commencement of operations at the AES Colón CCGT and regasification facility and improving hydrology in Panama. Finally, in Eurasia, our results primarily reflect the sales…

First question to start with Andrés, just again coming back to the basic assumptions underlying your '18 to '22 growth, to be clear on some of the comments you've made with regards to Bulgaria. Are you assuming that you continue to own that project through the full-year period and that the current economics stay where they are. It wasn’t quite clear what's baked into the assumption with Bulgaria, and then also related to that on the Ohio distribution rider. Can you give us some further thinking and your confidence level on why you think you will get the extension beyond 2020? Just in terms of any commentary or any conversations with the commission that would be helpful. Andrés Gluski: On Bulgaria, Bulgaria is in our forecast. As we said, our guidance is robust to any reasonably likely outcome there. So we feel confident in our guidance. It does conclude Bulgaria. As been said, conversations are in the very early stages. We think we have a very strong case. And certainly the plant is necessary for Bulgaria. It provides a lot of jobs locally, especially if you include the mining sector. So, yes, it's included. But our guidance is robust to any reasonably likely outcome. Regarding DP&L and the rider, I mean, basically what I can tell you, is that this has to do with company achieving investment-grade. The company has plans for grid modernization, grid resilience. And we think those elements are necessary and likely to remain. So basically the outlook for DP&L in terms of improving the quality of new services is good and the monetization rider is part of that.

And then second question, just to clarify the fact that you're running at the higher end of your near term '17 through '20. Would you attribute that to faster than expected success in your renewable strategy? Or what's driving you to that higher end at least in the near term? Andrés Gluski: I would say all of the above. I think we've been very successful on cost cuts. I think we've been very successful on the green blend and expense strategy. And as I mentioned in my speech, we're very pleased by how we've been able to transition projects from development into construction on the renewable side. So it's all of the above.

I'll still add, Ali, the LNG sale which is accelerating, so that's another important element of that guidance that we are providing.

And last question. I just wanted to be clear on the sources and uses that you've laid out as you fund this CapEx through 2022. Just to be very clear. You're not assuming or you don't see a need for external equity to support this program. The internal cash flow and asset sales should fund all your needs to support the backlog and the growth through 2022. Am I correct in that? Andrés Gluski: You are correct. So this is an unambiguous yes. The program is such that between our internally generated cash flow, including some asset sales, we fully fund our program and pay the dividends and also some modest debt pay down as well. So this does not assume any additional equity.

The next question will come from Julien Dumoulin-Smith of Bank of America. Please go ahead.

So I just wanted to follow-up a little bit more on the backlog and the capital allocation commitment. Just want to be a little clear about this or perhaps quite clear, both '19 and through the '22 outlook. How are you thinking about the net income contribution from the renewables growth as it stands today? You've got $1.5 billion and broadly allocated and again I know that's not necessarily all for the renewables business. But how are you thinking about renewables' contribution specifically year-over-year into '19 and through '22 from the plan and/or what you've contracted today? However you want to characterize that. Andrés Gluski: Well, let me stand in big picture. Big picture is we have considerable capital tied-up in construction projects, which we will be cutting the ribbon from now through 2021. In many cases, we have contributed all of the capital that we need to contribute. So, most of our growth is coming from organic projects and just cutting the ribbon. So I want that to be perfectly clear. Second, you have to remember in our renewables program, half of this is outside the U.S. and the half that’s in the U.S., about 40% is win. So the contribution, for example, of HLBV is so far negligible, and it's not as big for us as it is for other people going forward. So in terms of the growth, as I said, a big contributor to this is the organic growth coming from the projects we have completed. In addition to the megawatts that I've mentioned, for example, we have completed the storage tank in Panama, which is going to happen about the middle of this year. So we have additional projects coming online from there. So with that I can pass it off to Gustavo but I want to make absolutely unambiguous that we have very strong organic growth coming on. And given the distribution of our growth, you don't have things like HLBV outside of the U.S.?

So if you look at our 7% to 9% approximate 60% of that is just the materialization and reaching COD, especially the large thermal projects, Southland, OPGC, full year of follow-on and so on. The 40% is from the renewable space. Out of which half is internationally is in the U.S., so it’s not a major contributor yet for earnings. And I think one way to see that is our proportional -- our current free cash flow is also growing at the similar rate 7% to 9% for the same period.

And just to make sure I understand this. So for '19, because I appreciate that HLBV nuance and just the timing in-service, renewable contribution is fairly limited to growth. But as you say 40% of the overall 7% to 9% roughly, call it may be little bit less than $150 million of net income growth, is coming from renewables by the end of the '22 period?

Yes, and that's global renewable. So as Andrés mentioned, half of that 40%, call it 20%, is internationally, which doesn’t have that affect. And the local one then you have 40%, which is win and then the rest is solar. So it's a subset of the 40% at the end.

And just want to clarify one more nuance detail here. That 40% for renewable, that's relative to what investment in renewables. What you've contracted thus far or what the cumulative plan entails? I just want to make sure we're specific there?

It's the cumulative, yes. What we have expected throughout the period.

The next question will come from Angie Storozynski of Macquarie. Please go ahead.

So first on your credit metrics. Can give us a sense where credit agencies are now that you have reached the investment grade metrics? And also you are just showing that this one metric. Can you comment about FFO to debt or net debt-to-EBITDA what those metrics are? And again, mostly because I'm trying to gauge when we should expect upgrade to the current rating?

So our base case is to get the metric in 2020. So it continues to be the case. We just started our process with the agencies. They are supportive. They've seen all of the efforts that was done in terms of reducing the leverage. From an FFO to debt, we are closing '18 at 18.8%, 20% is above the threshold. So that is why you see in our capital allocation another $150 million. I think what is more important is that from a capital allocation standpoint, most of the heavy lifting has been done. So we've paid down close to $1 billion of debt last year. So what is remaining in the plan is it's a relatively small amount, but rate agencies will take their time. So we are still expecting the actual action on the rating to be taken early next year 2020.

Secondly, so in you press release you talk about this additional sell down of your stake in sPower. Is this -- I mean I remember that you guys mentioned that Tom is working on some systemic or structured relationships with a party that could take future ownership of operating assets. Is this what it is? Or are we still waiting for an announcement and it's still scheduled for roughly mid of this year? Andrés Gluski: No, this is not part of that. And as we've said in the past, Tom will be working on the more systematic way of getting partnership money into our projects. And stay tuned, at the right time, we will explain this. But this is -- as I said, we've done $3 billion of partnership capital over the past five years. And so this is an extension of that.

And then my last question, I remember you made comment about your dividends, the competitive dividend. Once you actually pay down all the debt that is required to the people of the credit agencies. I mean should we expect that the dividend growth will be commensurate with the earnings growth?

I think again so stay tuned. We said that we would have competitive dividend growth. And so this is approved annually by the board. So stay tuned. But we're in that 4% to 6% ranges, which is the industry average. So we should expect this to be within the 4% to 6% range within the site, within the four year period, and really validated by the board. So 4% to 6% is what we should expect.

The next question will come from Greg Gordon of Evercore.

Just to circle back to couple of the original questions. You said that -- is your plan also resilient to potentially not getting the BMR extended by two years. So as we think about 7% to 9% growth rate, while you're assuming that you do get the extension if you were to not get the extension, which is still be inside of growth rate? Andrés Gluski: What I'd say is look we have we think a very robust plan. It's taking any potential downside. We have a number of potential upside. So certainly, we could have faster growth, for example, of our LNG sales, which are very attractive because we basically made the capital investments. So there's certainly a potential market there for that. Second, as I mentioned in my speech, we really haven’t incorporated all of the potential benefits from our digital transformation. So that has been a significant amount of cost cuts. I think we have a very good track record of over delivering on cost cuts. But it also has significant revenue potential. So as we don't like to talk about these things until we really have them in hand. So when I look at that, this is a robust plan given I think that any potential downsides or offset with potential upside and these potential upsides are quite concrete, we feel. So stay tuned.

And there was no mention of the preexisting cost-cutting initiatives in this slide deck. I shouldn't presume that there's has been any change? Andrés Gluski: No, there hasn’t. And in fact we remain on track.

So the plan has been fully executed last year. So we are getting in '19 run rate savings of $100 million, which was with what we had disclosed it before, so in line with prior disclosures.

And the $2 billion asset sell target is still in place, but you extended the overall guidance framework to '22. Does that imply that the asset, the pace of the asset sales is slowed or do you still expect to have the majority of those asset sales completed by 2020?

I'd say by 2020 we'll complete the $2 billion what we expect, that's part of this plan. Going forward, we will continue to fine-tune our portfolio. So there may be additional sales but as part of the portfolio. So they may not be wholly exiting, they may be like we did it as far selling down a portion and reinvesting that money and higher return. So that remains part of our modus operandi going forward.

No, I get that, completely understood. I just wanted to make sure the pre-existing targets were still haven’t slept and the answer to that is no they haven't…

No, pre-existing targets, not at all. We feel very confident about them. And we expect to execute on that.

And then on the targets for the renewables growth, they are quite robust. And it's a little bit of a blend and extend in that and then in your prior guidance, you had targeted 3,000 megawatts for '19. Now you're targeting 2,500. But you're targeting and consistent execution over a longer period of time. And you have a higher end exit rate, exit number in terms of total aspirational growth in renewables. What should we look for over the course of this year to see that you're hitting your targets, because there was a bit of a deceleration in wins when we look at what you've executed in Q3 and Q4 of '18?

Greg, this has to do just with the timing of the signing of the PPAs. There has been no, from our point of view, no let's say feeling that we're going slower than we were previously. It's just a little bit of timing and making sure that we have these PPAs signed before we commence construction. So the way you can make sure that we're on track is just we will have the announcements of the growth, the milestones that we hit throughout the quarter. So again, green blend and extend has shown itself to be very robust, and we're actually doing very well there. And certainly our distributed LNG as the announcements we've had in Hawaii and other places, it is very robust. So, no, we really don't feel that we're decelerating. It's just a question of the timing, which these projects are going to come in.

The next question will come from Christopher Turnure of JP Morgan.

I want to follow-up on some of the renewable financing comments that you've made so far. Just overall could you give us thoughts on how that effort is going? I don’t know if Tom is on the call or not. But where you are seeing the lowest costs, both in the U.S. and globally? And then your slide on the IRRs for renewables. Does that assume that you are tax efficient or does that take into consideration any tax inefficiency that you have? Andrés Gluski: Let me see, so that’s multiple questions. Let' see. So first, Tom is not on the call. And what is assumed in these numbers is that tax efficiency, and what is assumed is, for example, I'd say mainly in the U.S. where we actually sell down a portion once it reaches operations and optimize it for operational and financial efficiency. So that's I'd say basically it. I think in the rest of the world, what we're seeing especially for example in South America and in Mexico is really the green blend and extend project itself. Again, you don't have a HLBV, you don’t have ITC, you don’t have some of the other elements that you have in the state that make it, let's say, a little bit more complicated accounting and less transparent to see through. So I would say it's basically that. We will continue to do what we've done. So we think this is very credible. We've done this and we will going forward. And different markets are progressing at different speeds. We certainly see that the combination of solar energy storage is coming into being and that’s an area where we have we think a real competitive advantage.

And then just going back to the IRR comment that you made. Does that mean that the numbers on that particular slide are hypothetical and your actual returns are lower than that? Or do those numbers take into consideration everything?

This is actual IRR, so cash-on-cash, so this is not ROE it's actually IRR. So that's cash-on-cash real return.

And then just to follow-up to I think one of the earlier balance sheet questions. You mentioned that a year from now roughly is when you're thinking agencies might come back to the table here and revisit your ratings. Could you give us any color on how your discussions on business risks are going within that overall discussion?

Yes, sure. That's I think one of the upside and one of the positive feedback that we get. I think we continue to be a diversified portfolio, which is important for them but more focused on markets with lower risk. So I think from that perspective, we get very good feedback from their agencies and it's an important component of our trajectory here. It's not only a question of the quality of our portfolio. So I did mention in my speech that, measurably our risks are down 70% over the last five years, to make very big something like Panama where we have 777 megawatts of hydro. In a dry year, we would be forced to buy in the market and therefore, energy would be high, energy to supply our contracts that are contracted. And now with Colón in place and natural gas coming into Panama, we have such that particular risk by about 80%. So the quality of the portfolio is backing up the numbers. I think that’s very, very important. In fact, what's underlying the subsidiaries our investment grade as well and we feel there's hydrology commodity FX risk is very much. So it's not just the metric itself, I think it's a quality of those metrics.

So it sounds like you're pretty much there in terms of the business mix and your improvement, you just need to maybe execute for a couple more quarters to get that recognized?

That’s exactly right. Yes, we think there's a seasoning that those agencies will require, but we feel pretty good of path we are on. And we feel very good that our business mix continues to improve the quality of the portfolio.

The next question will come from Gregg Orrill of UBS.

Regarding the 24% sell down and sPower, what's the impact there on returns or earnings of sPower, how are you thinking about that? Andrés Gluski: I don’t think we want to specifically discuss that amount. But obviously, once you have operating assets up and running under long-term contracts, there're other people who are willing to or interested in owning those assets for the long-term at less returns than you'd get when you are the originator, developer and constructor of those projects.

I think what I've been saying, Greg, when we bought its how we bought at high-single digits. So after the acquisition we secure the refinancing, the operational includes maintenance so on plus those sell downs we've brought this to 13%. That is just part of that value creation that we're able to conduct.

The next question will come from Steve Fleishman of Wolfe Research.

Just on the Ohio DMR, could you just remind me how much earnings come from that?

Today we have $105 pretax, so $105 million per year…

And are you tying the two cases such that if you're not going to be getting that in the future, if they don’t extend it, you are not going to be able to commit to grow the investment in the grid?

That's right. I mean, they two work together so we need -- we believe it's important to have the DMR for us to be able to continue the transformation of DPL including these markets with investments.

And the just on your -- you might have answered this. But just how would you characterize your returns on new renewable growth projects in U.S. relative to that 13% that you are now up to on sPower acquisition?

I think we have a different project in the U.S. We have project -- several AES distributed energy projects then we have sPower projects, we have C&I customers, we still have some deal in the works. We have deals where we're really combining energy storage in new. So there is a range depending on the particular niche, let' say, I would say that we're addressing. I would say to -- and again I would also say that you when we characterize these returns, this is just the project return that we're looking and not any leverage at corp or anything above. And we were very conservative I'd say about terminal value. But obviously in the plain-vanilla in the U.S., it does involve that we would flip portion of the operating assets to some long-term holder other than ourselves. So there is that combination. But we do have this mix, so it's not like a uniform product that we are selling across the states.

And then one last question just on -- I thought I saw somewhere that you might have won storage project with Arizona with APS. And I don’t know -- I didn’t see that in your -- could you talk about that, and it seem to be pretty sure?

It's a 100 megawatt four our energy storage, so it's 400 megawatts hours. This is quite frankly exactly the size of the one that we have on Alamitos that we're building today. And so as you put those two together, we have two projects of 100 megawatts to four hours each that would be 200 megawatts, 800 megawatts hours between the two projects.

But that's not in what you announced as of the year end, that would be additive?

That's correct, that's not in 2018 numbers.

The next question will come from the Charles Fishman of Morningstar Research. Please go ahead.

If I can just follow-up on Steve's question. So with Fluence, end of the year award and delivered 766, if I my math is right versus I think at the third quarter it was 701. So 65 megawatts were added during the fourth quarter. What specifically was that? Andrés Gluski: Fluence is a JV between us and Siemens. But Fluence own sales team is doing quite a lot. So they're in 17 countries with 80 projects. The projects vary from smaller projects. It can be 500 KV or a multiple of them, smaller units 500 KV one megawatt but the larger units as large as the 800 megawatt hours. So honestly I don't have off the top of my head, which of those projects are. But realized we're hitting everybody from C&I customers to the very largest utilities and everything in between. So it's a mix of product. And the large ones tend to be a bit lumpy, but we like very much of the smaller projects that come in. And we increased the number of countries around the world. One thing that’s probably we at AES together with Mitsubishi inaugurated India's first energy storage project last week in Delhi and this together with Tata Power. And this project is I think very important for India, because it establishing how energy storage would work on that grid and getting the regulations in place. And as you know India has -- it is actually building out 200 gigawatts of renewables, probably 80s I think are in the bag. And they are going to need a whole lot of energy storage to be able to accommodate that much renewables on their grid. So there's a lot of interesting markets opening-up.

And we'll see this number order and delivered jump when you report first quarter, because of APS? Andrés Gluski: As I said, there will be lumpiness as these projects come in.

And one other question Andrés, I want to make sure I got this right. You said that by -- I believe you said that by 2022, 50% of your PTC coming from the SBUs will be U.S. generated. Was that correct? Andrés Gluski: There is course, especially when you have renewables with shorter time frames that are rolling in terms of -- this will be rolling overtime we have to win some of those bids. But yes, given our current expectations is a little less than half will be U.S. and that's up from about a third today. So the proportion of our pretax contributions coming from the U.S. should rise overtime given our expectations for where that growth is coming from. Obviously, we have like Southland coming online. We have a number of projects in Hawaii. You mentioned the APS. So we've signings certainly in terms of megawatts, lot of big projects in the state. You also have the investments -- future investments in the DP&L as well. So we have great visibility into a strong pipeline of growth in the U.S.

And this concludes the question-and-answer session. And I would now like to turn the conference back over to Ahmed Pasha for any closing remarks.

Thank you everybody for joining us on today's call. As always, the IR teams will be available to answer any questions you may have. Thanks again and have a nice day. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.