Good morning and welcome to the AES Corporation Third Quarter Financial Review. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the call over to Mr. Ahmed Pasha, Treasurer and Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to our third quarter 2020 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, which are discussed in our most recent 10-K and 10-Q filed with the SEC. Reconciliations between GAAP and non-GAAP financial measures can be found on our website along with the presentation. Joining me this morning are Andres Gluski, 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 Andrés. Andrés? Andrés Gluski: Good morning, everyone, and thank you for joining our third quarter financial review call. Today, I will cover both our near-term priorities and the progress we have made on our larger strategic goals. On our last call, I outlined three top priorities: first, achieving our 2020 guidance; second, attaining a second investment-grade rating; and third, decarbonizing our portfolio. We see all three of these goals, both individually and collectively, as catalysts for attracting a wider investor base. Perhaps more importantly, we see all three as clear demonstrations of our ability to thrive in today's evolving landscape. Today, I am pleased to report that we're making great progress on all of these objectives and have several exciting developments to discuss. First, as Gustavo will review in his remarks, our portfolio continues to prove its resiliency in the face of COVID-19, and we're on-track to achieve our full year guidance. In fact, we expect to be at the top end of the ranges for both adjusted EPS and parent free cash flow. Turning to our goal…

Thank you, Andres, and good morning, everyone. Today, I'll cover 3 key topics: our resilient business model, our performance during the third quarter, and our capital allocation plan. Let me start with our resilient business model. Over the last decade, we have proactively transformed our portfolio. And now 85% of our earnings are from utilities and long-term contracted generation with an average contract life of 14 years, supported by creditworthy offtakers. At the same time, more than 80% of our earnings are now in dollars. This provides significant stability to earnings and cash flow. Turning to Slide 16. You can see how our portfolio has performed during these challenging times. As you know, a majority of our customers are large industrials and export-oriented mining companies that continue to operate despite COVID-19 as they are deemed essential. As a result, Q3 receivables and days sales outstanding remained stable and very much in line with historical levels. Moving on to Slide 17. The impact of the global lockdown on our financial results has been mostly limited to our utilities. Our generation businesses have been largely unaffected due to the take-or-pay nature of contracts and customers being deemed essential. As you may recall, in our first quarter call we had anticipated an extended U-shaped recovery in energy demand across our markets. Since then, demand performance has been better than our expectation. For Q3, our initial projection was for a demand drop of about 5% to 7% at our U.S. utilities. While the actual result was significantly less severe than anticipated, on a weather-normalized basis, the net combined volume at DPL and IPL is mostly flat. Demand at DPL was up 3% and largely driven by the higher load from residential customers, while demand at IPL was down 3% as the load from commercial…

[Operator Instructions] First question comes from Richard Sunderland of JPMorgan.

Maybe starting -- just starting off with the Fluence process, could you update us on the latest timing and expectations around the sale of the minority interest? Andrés Gluski: Sure. The capital raise at Fluence is going very well. We have strong interest, and we expect to get it done by the end of this year.

So namely kind of no impacts from the elections or considerations around there specifically to the sale? Andrés Gluski: Not really. I mean this capital raise, people are looking at the long term. And certainly, lithium ion-based energy storage has a great future ahead of it. As the -- as I said in my remarks, it's growing very rapidly and it's the leader in the sector. So it really is a unique investment opportunity. So no, we've seen no impact whatsoever.

And has there been any shift in the kind of interest or type of parties evaluating Fluence? Andrés Gluski: None whatsoever.

Got it. Great. And then just quick on the outage cited on the quarter. I know you said one of the facilities back in operations. Any color around the outage itself and I guess risks going forward?

No, it was -- this is Gustavo, Rich. No, it was an outage that we had in there in one of our facilities there. It's about $0.02 impact in the quarter, but the facility is back in operation already.

Next question comes from Julien Dumoulin-Smith, Bank of America.

Congratulations on a -- a litany of developments here, it's hard to know where to start. At the outset here, how about this? So you've had a lot of success across your businesses here. When you think about the earnings trajectory of the renewables business altogether, how would you characterize that, right? Given the backlog, given the success year-to-date, given the capital available to deploy back into it, how in aggregate would you kind of describe its attribution or contribution to the EPS growth rate? And then relate it to Fluence as well, if you can. I know it's still small. Andrés Gluski: Okay. Let me start sort of big picture. Most of our business, most of our earnings is coming from the traditional businesses. So this is sort of an add-on, and we're retiring some of the thermal assets. So it's a transition. So it's going to be growing over time. We feel very good about the way it's sort of blending in. Something like Green Blend and Extend it's blending in to this growth. So we have a backlog of 7 gigawatts. It's a good mix of U.S. and outside, and it has good returns. And there's a variety of regulatory schemes under which they operate. So we feel good about it. It's going to be growing, and it's going to -- it's replacing some of the older thermal assets that we're retiring. Second part of your question regarding Fluence, well realize that as I've said in the past, the faster Fluence grows, to some extent it pushes off a little bit positive earnings. We're creating an enormous amount of value. But all R&D for example or all upgrading of our teams around the world, that's expensed. So when you're growing 400% this year, we expect a 40-plus growth rate going forward. We have a backlog of 1 gigawatt; so that's still up. So there's no -- right now, Fluence is a drag of around $0.02. So it will -- everything has a positive margin. We expect this to turn around, but it's a little bit of a function of how fast we grow. So ironically the more value we create and the faster we grow, that may take a little bit more time.

Now, if I can pivot this slightly more specifically to your guidance, when you think about this roll forward coming up with fourth quarter, and I know I'm kind of asking for guidance without getting it explicitly, how are you thinking about some of the major puts and to pick here? Because as best I see it, it seems like you resolved a number of these issues. And so I just want to make sure we're on the same page about this, whether it's DPL, whether it's related to Gener, or frankly whether it relates to your execution on backlog on renewables. But can you give us at least a sense for some of the bigger puts and takes here and/or other factors that you've mentioned? Andrés Gluski: Yes, you've mentioned most of the factors. I mean we have rapid renewable growth, Green Blend and Extend,. We have DP&L, IPL, growing their rate base. I think the one that you did not mention was the growth of LNG. So you realize that we are doing very well on contracting more really tolling of gas in the Dominican Republic. We're very -- actually we have the contracts there. We're very optimistic about doing more in Panama. And as I said in my speech, those will all contribute to our earnings at 23 and beyond. So most of the investment is made. So having said that, that's how we see it. So we feel optimistic. And that's why we've included the retirement of -- or part of that guidance. So we can't give you guidance before the fourth call. Gustavo, do you want to add something?

Yes. I would just add, Julien, in addition to what Andrés just said, I think California, the extension of the legacy unit is another important driver, right? So -- And also the incremental cost cutting. Remember, we had talked about $100 million of cost-cutting through 2022, half of that through 2021. So those will be helpful, and eventually we'll be able to capture more post that period. And I think to your question on renewables, probably the best way to think about it is most of our free cash is going to renewables nowadays. So it's about $350 million to $400 million of investment in new renewables going forward. And you put low double-digit to mid-teen returns, and you see that this is going to be an important driver of earnings going forward.

And just -- sorry to clarify this. When you were speaking on LNG, can you elaborate briefly on Panama on the IMO piece of this in terms of bunkering and the upside potential? Andrés Gluski: Well, basically our current facility, especially the storage tank in Panama, is about 30% utilized. All the capital investment has been made. So to the extent that we can contract more gas passing through it, that goes straight to our bottom line. And so we feel good about the possibility of contracting more gas in Panama and increasing that utilization. In the case of the Dominican Republic, we had talked about this for many years, that actually we filled up the tank, to the extent that we're actually having to build a somewhat smaller but second tank there to meet all the demand. So realize this is contracted. It's tolling. We're not taking commodity risk. So our gas strategy in the Caribbean and Central America is playing out as planned.

One more clarification, on Indiana, I didn't hear you say anything about PUCO and renewables. I know there's an RFP out there. Apologies, if I could.

Yes, there is an RFP as we speak, so the team is finalizing. And it's one of the opportunities that we have to sign up for more renewable growth there and rate base. So stay tuned, we'll be talking about that shortly.

Got it. Not yet in there. All right, great.

Not yet in there. Andrés Gluski: Thanks, Julien.

Next question comes from Stephen Byrd with Morgan Stanley.

Congratulations on progress on a lot of fronts. I agree with Julien, it's kind of hard to know where to start. Andrés Gluski: Thank you very much.

So I wanted to maybe start at a high level and just talk about your renewables business globally, and thinking about sort of how to realize the full value of the business. The business has become very large. It's one of the biggest backlogs globally. How do you think about ensuring that you realize the full value, given that it's housed within AES? And this has always been sort of a question in terms of highlighting the values of these businesses. And I think it's just really accentuated, given the trading levels of pure clean energy companies. Just curious how you're thinking about the long-term strategy there. Andrés Gluski: That's a great question. We think about that a lot. So really what we see is that there is a true competitive advantage of combining our existing platforms with the new. And I say that because it's easy to talk about renewables, but really that's just energy. And what the market is demanding is capacity. So you're going to get that capacity in the short term from your existing traditional facilities and then with energy storage. So thinking about that, nobody is in a better position than us to do that because we really are the leader in the -- not only the amount of energy storage, but more important, I think the new applications, finding new ways to use this. So I feel very good about this sort of leading this transition in a very responsible way retiring our coal plants, selling coal plants, providing that capacity to some extent in other new markets in -- with gas. Because quite frankly not all markets are capable with today's technology of efficiently providing capacity. Even with batteries, it would be too expensive with renewables. So we're leading that transition to a lower-carbon future. But at the same time, I think we're uniquely integrating, be it energy storage, innovative renewables. I mean I think 5B, that technology will play a greater role in the future as you get greater really penetration of solar in some areas. And so being able to do it in a smaller space is very valuable. Being able to do it faster is very valuable. We're really doing some very interesting things on robotics. We're doing some very interesting things in digital, digital controls. And so Uplight is one aspect of it. But so is for example, the purchase of AMS by Fluent. So that's a little bit how I see it. So while it's true that there is a premium today for pure renewable plays, we think there'll be a premium tomorrow for those companies that truly satisfy what customers need. So it's not only energy. It's energy plus capacity. And we will lead the way into providing capacity, energy and customer-facing solutions into the future. So it's a very interesting transition, even though it's a little bit complicated story.

Those are good points about capacity and integration. I take those points. Maybe shifting over to the corporate customer side. The Google arrangement makes a lot of sense. I was just curious your latest thoughts in terms of additional appetite from other corporate or potential corporate customers to do something along those lines, given AES' global platform? Andrés Gluski: That's a great question. So we have a, say, arrangement with Google. We're exploring several fronts. As you know, we do have an RFP out for a gigawatt and PJM. We will, we believe, making announcements into the future in terms of how we will be working together, as I said, several fronts. But this is not something that will not exclude other clients, potential clients. So as we find ways to provide the capacity people need and the low carbon that people need, plus a digital overlay. That is certainly something that we believe will be attractive to a lot of clients. So Green Blend and Extend, for example was an interesting solution for a lot of the big mining companies that wanted to lower their carbon footprint and have cheaper energy. And again, that can transition over time to net 0 solution, but it's going to take some time to get there.

Understood. So it sounds like while there's a lot of opportunities, it's going to take some time to really to get traction with a lot of corporate customers, to the point where this is a more meaningful part of your overall business mix. Is that fair? Andrés Gluski: No. I would say that -- I guess what I'm saying is that I expect to do more with corporate customers. What I'm saying is that depending on what the situation is. It may take longer or less long. It depends, on the market they're in, depends on the availability of renewables in that market, and it depends exactly what the customer wants. I mean what we're really working with is sort of co-creating with clients and co-creating what they want. And I think again we're also uniquely positioned to do that, not only because of the various technologies we're involved in, but also, quite frankly our modus operandi with the client. So, if you think of something like KIUC in the first sort of 24/7 renewables, load-following renewable solution in Hawaii, that was codeveloped with them. So the same way we like we're working with Google, we are working with other people. What we've done in Chile, we've also worked with the client. So I hope that answers your question. So no, I don't see this way off in the future. I see there's a certain relatively short term and growing over time as the clients become more clear exactly what they want, and some of the technologies get cheaper.

Sorry, I misunderstood. Great. Andrés Gluski: Thanks, Steve.

Next question is from Charles Fishman of Morningstar.

Andrés, the PPAs awarded and signed year-to-date, Slide 53, a big win for Gener on solar. You picked up another project to that power solar. Why if I compare this exhibit to the 2Q exhibit, AES distributed energy actually went lower on solar [ph]? is that you lost the projects just moved it around to a different subsidiary? Or what -- you don't agree with that? Andrés Gluski: Yes. Sorry, are you looking at, what, the Annex Page 53?

Yes. Slide 53 has the AES DE, distributed energy, right, I believe? Yes. And you could see that, okay, you got solar 91 megawatts you signed year-to-date, storage 97. But then if I go back to 2Q, I see AEs Distributed Energy [indiscernible], both of those quite a bit higher.

Yes. Charles, this is Ahmed. I think Charles, some of these projects that we show in the backlog, they are only either in construction or we have signed -- if the project is completed, then that goes back to operations. That's no longer part of our backlog.

Okay. So this is something -- they were projects that went in operation in the quarter that you moved off this line.

Yes.

Okay. Andrés Gluski: Once it's in operation, it's no longer backlog.

Yes. Andrés Gluski: It's been fulfilled.

Backlog, the way we define backlog is either is in construction. Or we have signed the PPA, but it's not yet in construction. But if it is completed, it gets out.

Even though it was signed this year [indiscernible] operation, you take it off this list.

Yes.

Okay, got it. Now another question previously asked on Indiana IPL, if I could maybe push a little harder on that. We've recently seen two other utilities in Indiana really go all in on solar. And yes quite frankly, AEs has more solar experience than both those other utilities combined plus some. Do you have the opportunity at IPL to retire from coal or old gas plants that we should expect some movement like that? It seems like the Indiana Commission is very receptive to that direction. Andrés Gluski: Yes. Well, we have an RFP for 1.2 gigawatts of renewable, so stay tuned for the results of that. And in those numbers that I gave in this call of 1.2 gigawatts of retirement, there's some of the older coal plants in Indiana. So as a regulated, we have to get approval for this transition. But you're right, we have a whole lot of experience on that, and that's what we're going to do.

Okay, that's helpful. Thank you; that's all I had. Andrés Gluski: Thank you, Charles.

Next question is from Steve Fleishman of Wolfe Research. Please go ahead.

Hi, good morning. Just wanted to clarify on the coal getting below the 30% announcement. Was there something that didn't get done in terms of an asset sale or something? Because the -- I think these shutdowns were already planned for a while and they're not happening until '21 or '23. So I guess I'm just trying to figure out how that fits into meeting it by the end of '20? Andrés Gluski: Yes. No. Thanks for the question. No look, what we have in there in our pro forma are sales that we already have a signed contract with, or a plant that we've already programmed to retire. Now that does not exclude additional sales. Now we're not behind on any additional sales or additional shutdowns. And as we said, we expect more in the near term. So we're saying it's 29 already in the third quarter. We had said we would do it by the end of the year. So stay tuned. We think we'll be comfortably below the 30% threshold. And remember, that's megawatt hours. It's actual generation. So actually capacity, we're already at about 26% and will be -- continue to decline. So honestly we haven't missed any of our internal milestones.

Okay. I'm sorry, Andrés, I need to clarify this. But these plants we've known they are going to be shut down for a while. It's not like new, I think, and they're not actually being shut down by the end of 2020. So I'm confused...

No. I think -- Steve, Ahmed here. Most of these plants I think we got approvals, like Hawaii they just passed the law. We've got the regulatory approval in Hawaii. Then also [indiscernible] as well; so I think these are all the developments that we just announced. So these are not some things that got improved...

Indiana too; because I thought...

Which one, Indiana? It's about 500 megawatts. I think this also got approval. We just made that filing, I think it's about a month ago or so. So Steve...

Okay. And in terms of meeting the target, it doesn't matter if they don't shut by the end of 2020 or you don't sell by then, as long as you're shutting a few years from now? Andrés Gluski: Yes. I mean we've been in discussions with ESG investors like Norges Bank. And it really was like, "Show me a path how you're going to get there in the near term." So really this is reflecting what they've asked us to do. We're going to overperform, I assure you of that. And we've been somewhat cautious in terms of our announcements. Because as Ahmed said, what we've shown this time is what we've actually gotten approvals to do. These aren't just, "Gee, I wish -- I'm going to shut this down." Well, can you really shut it down? And you need to have the approval of the regulator of the network operator. So that's where we're at. So honestly this is exactly what we discussed with people like Norges Bank, exactly what they asked us to do. And if anything, we're upfront about it. Now, it is pro forma because in some cases, you -- the retirement, they still need it for, say, another year in some cases. But stay tuned. We'll -- I assure you that we will...

You announced that Petersburg retirement a couple like years ago or we've had that... Andrés Gluski: No, no, we did not.

I guess that's helpful. it was the -- Andrés Gluski: And I think the punchline is, Steve, just to be clear, we have not seen any delays in the transactions we are working on as far as the sell-downs are concerned on the coal side. So I think we still continue to see the interest. So I don't think there's you need to read anything between the lines.

Okay, that's helpful. And then just the -- on the DPL settlement, the path there, it looks like you -- your -- it allows you now to invest the money and get the rate base growth from that. That's going and keep -- and also keep the current of the old ESP rate. And then I guess at the end of the period, the old ESP rate goes away, but you can then keep growing the rate base from thereon. Can you -- is there any way you can kind of extend this old ESP rate that's still in through 23?

I think the -- our expectation is that October 23, we'll file ESP for. It will probably take 12 to 18 months to get approval, and then we're going to get into a new ESP without the RSC. But the plan is we will build up the rate base in the meantime, so we can continue to post growth post that period.

Yes. Okay, great.

[Operator Instructions] Next question comes from Chopra, Evercore ISI.

I have one clarification and then just one big picture question. Just going back to - maybe, Gustavo, maybe this is for you. But just going back to Slide 28 here when we sort of look at the cash generation, and you have about $250 million left of the $900 million, $650 million announced. I just want to be clear, the Fluence transaction, any proceeds there are not on this slide, correct?

Not on this slide. It's all going to be kept at Fluence.

Okay. And it will be kept just at Fluence. I mean there's not user proceeds in terms of with your other businesses.

No, none.

Okay. And then maybe just big picture, obviously this year you've executed strongly. But 7% to 9%, can you just high level talk about what gets you to 9% versus what gets you to 7%? Andrés Gluski: I would say that the difference will have to be in terms of the projects that we have, how fast for example we fill up the gas tanks at Panama and the DR. It will have to be a little bit in terms of demand growth at our utilities and probably execution of our renewable projects. I'd say those are the 3 drivers. As Gustavo said, we have cost cuts inherent. We have lower financing costs as well. So all those are pluses. So I'd say the ones that are outside of our control, to some extent a little bit would be the demand growth in the utilities, and a little bit the timing of filling up the tolling capacity in Central America and Carribbean.

Got it. Helpful, guys. Maybe just one quick one Just as you think long term, Andrés, I mean you have a pretty good competitive advantage here with storage and with renewables. Just how do you think about balancing, growing internationally, versus sort of your renewable portfolio internationally, versus being 50% earnings from the U.S., that's your long-term target? Andrés Gluski: That's a great question. Look, our objective is to be an investment-grade company, continue to strengthen our balance sheet and the mix of our businesses. We move very strongly towards investment-grade, dollar long-term contracted business. And that's why we've been so resilient this year in an uncertain environment. I think we've proven that. And we've improved our credit rating in the midst of COVID. I think that says a lot for the strength of our business. We think the optimal mix, also given market conditions probably, is about half U.S. and half outside. And we think that's optimal. We have big corporate opportunities in the U.S. It's a strong market for us. We also think that we have good corporate demand internationally and somewhat unique to us. And we do get higher returns in general internationally. So we think a sort of 50-50 split would be ideal. It's not we can orient it in one direction or the other. Part of it will have to do where our clients demand and where we have competitive advantages. But we think we're developing really global competitive advantages. So it's not only international. We have them here in the U.S..

That's great. Great quarter. Andrés Gluski: Thank you

That concludes our answer -- question-and-answer session. I'd now like to turn the conference back over to Mr. Ahmed Pasha for closing remarks. Please go ahead.

Thanks, everybody, for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have. Next week, we look forward to seeing many of you at the EEI Conference. Thanks again, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.