Executives: Ahmed Pasha - VP of Investor Relations Andrés Gluski - President and Chief Executive Officer Thomas O'Flynn - Chief Financial

Officer
Analysts: Ali Agha - SunTrust Robinson Humphrey Julien Dumoulin-Smith - UBS Greg Gordon - Evercore ISI Angie Storozynski - Macquarie Lasan Johong - Auvila Research Consulting Charles Fishman - Morningstar Gregg Orrill - Barclays

Capital
Operator: Good day, and welcome to the AES Corporation Quarter One Financial Review Conference Call. All participants will be in listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Also please note that 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.

Ahmed Pasha: Thank you, Ryan. Good morning and welcome to AES’s First Quarter 2017 Financial Review Call. Our press release, presentation and related financial information are available on our website at aes.com. Today, we will be making forward-looking statements during the call.

There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors. Joining me this morning are Andrés 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 Andrés.

Andrés Gluski: Good morning, everyone, and thank you for joining our first quarter 2017 financial review call.

Today, I will discuss our financial results and provide updates on our strategy to deliver attractive risk-adjusted returns to our shareholders. Since our most recent call in late February, we have made significant progress on a number of key objectives for 2017. We advanced our construction program, which will be the major contributor to our cash flow and earnings growth over the next four years. We capitalized on our existing platforms to further enhance future growth by targeting long-term US dollar-denominated contracts. We have taken steps to decrease our covenant intensity and merchant exposure.

These steps will reduce our financial and operational risk. We continued our efforts to strengthen our credit profile by prepaying $300 million of Parent debt. This also increases Parent free cash flow by lowering interest expense. We are on track to achieve our $400 million per year cost reduction and revenue enhancement program. I will discuss these achievements in more detail in a moment, but first I would like to summarize our financial results on Slide 4.

In the first quarter, we earned $0.17 of adjusted EPS versus the $0.15 we earned in the same period last year. We generated $546 million of consolidated free cash flow, $56 million higher than last year. Based on our first quarter performance and our outlook for the remainder of the year, we are reaffirming our full year guidance for all metrics. Now I would like to turn to our strategic accomplishments. As you can see on Slide 5, we have 3.4 gigawatts under construction and expect it to come online through 2019.

Overall, we have achieved significant progress on all of these projects. Turning to Alto Maipo on Slide 6, as you may recall Alto Maipo is an expansion of our existing Alfalfal plant in Chile. As we discussed on our last call, the project has been experiencing tunneling challenges resulting in cost overruns estimated in the range of 10% to 20%. Over the past couple of months, we have made significant progress on this project. First, we have secured additional financing commitment for up to 22% of the project cost equivalent to $460 million including contingencies, of which $117 million will be funded by AES Gener and the remaining $343 million will be funded by the project lenders main contractor and minority partner.

Second, Alto Maipo is now about 52% complete and we remain on track to reach COD in 2019. Turning to Slide 7, at our Eagle Valley, CCGT in Indiana, the EPC contractor is sub-contracting some of the work in an effort to accelerate the recovery plan. On our February call, we’ve revised the completion date for this project to the first half of 2018. However, the EPC contractor is projecting substantial completion before year end 2017. Although any delay is unfortunate, we have a fixed price contract with the EPC contractor under which they are incentivized to finish the project in a timely manner.

The CCGT has achieved several important EPC milestones, and we expect first fire to occur in the third quarter. Turning to Slide 8, in our 1320 megawatt OPGC 2 project in India, we continued to make steady progress on construction and the project is expected to come online by the end of 2018. Finally, turning to Slide 9 and Colón in Panama. I am pleased to report that we have reached a number of milestones on our Colón CCGT and LNG regasification facility in Panama. The LNG facility is efficient to handle 80 Terrra BTU annually.

Our CCGT will use about one quarter of the tank’s capacity leaving substantial upside potential to meet the fuel needs of additional power plants, ship bunkering services, and downstream commercial and industrial customers. We will continue to focus on providing a cleaner, more cost-effective alternatives to oil-fueled power generation while at the same time satisfying a growing need for natural gas in Central America and the Caribbean. To that end, on Friday, we announced that we have entered into a joint venture with ENGIE to market and sell LNG from our Panamanian LNG terminal to third parties in Central America. This joint venture will help us monetize the tank’s remaining capacity as additional LNG is sold using our terminal. It also further strengthens the agreement we signed last year to jointly market LNG in the Caribbean from our Andres regasification facility in the Dominican Republic.

With ENGIE as our partner, and both Colon and Andres online, in 2019, we will have the leading position in Central America and in the Caribbean’s LNG regasification market. Turning to Slide 10, as you know, we are the world leader in battery-based energy storage. We currently have 394 megawatts in operation, under construction, or in late-stage development not including the 82 megawatt of our advanced energy storage platform that we have sold to third-parties. Since February, we have delivered 37.5 megawatts of four hour duration storage, the largest lithium ion energy storage installation in the world, the San Diego Gas and Electric. Following our successful commissioning of this project, San Diego Gas and Electric has awarded us another 40 megawatts four hour duration project.

Although energy storage has significant potential for growth, at this point, we have not assumed any material contributions in our outlook. Turning now to Slide 11 and our cost savings and revenue enhancement initiatives. This year, we are merging our Europe and Asia strategic business units which will drive significant savings. We are also continuing the work we began last year on standardization and improved sourcing and reliability. These initiatives put us on track to achieve $50 million of incremental annual benefits in 2017 and to hit our $400 million annual savings target by 2020.

Now turning to our continuing efforts to reshape our portfolio beginning on Slide 12. As we have discussed on our recent calls, we have been repositioning our portfolio towards businesses that are less carbon-intensive and have long-term US dollar-denominated contracts. This repositioning is a key element of our strategy to reduce the risk of our portfolio. This year, we have already announced our plan to sell or shutdown 3.7 gigawatts of merchant coal-fired generation in Kazakhstan and Ohio. This is 26% of our total coal-fired capacity and 70% of our merchant coal-fired capacity.

Specifically, we divested 1.7 gigawatts of coal-fired generation in Kazakhstan for net proceeds of $24 million. With this sale, our only remaining assets in Kazakhstan are two plants with 1 gigawatt of hydro capacity, which are under concession that expires in the fourth quarter of this year. We expect to exit Kazakhstan following the expiration of this concession. We have already announced the shutdown of 1.3 gigawatts of merchant, coal-fired capacity at DPL. Subsequently, we’ve also agreed to sell an additional 739 megawatts of DPL owned generation for $50 million in net proceeds.

Although the Kazakhstan and Ohio merchant coal sales appear to have low value on a per kilowatt basis, on a PE basis, we managed to achieve a multiple of roughly nine times. We will continue to update you as we make progress on additional asset sales to further reshape our portfolio. Turning to new businesses. Slide 13 provides an update on our Southland Repowering in California. As a reminder, we were awarded 20 year PPA by Southern California Edison for 1384 megawatts of capacity which includes 100 megawatts of energy storage and 1284 megawatts of combining cycled gas capacity.

Last month, we received final environmental approval for the project. We are on track for financial close and to begin construction by mid-2017 with completion of the gas-fired capacity in 2020 and the energy storage capacity in 2021. We anticipate funding the $2.3 billion in total project cost with a combination of non-recourse debt and approximately $400 million in equity proceeds from AES. Turning to Slide 14 and our pending acquisition of sPower. We continue to see the potential for adding 500 megawatts to 1 gigawatts of renewable contracted power annually with attractive low double-digit IRR.

Furthermore, we see an opportunity to capitalize on the development skills of the sPower team to tap into the growing market for renewable PPA for large corporate and incorporating energy storage on their platforms. We received the FERC approval for the transaction last month and expect to receive the remaining approvals and close no later than the third quarter. As you can see on Slide 15, we are also making progress on renewable in Mexico, and Brazil. In Mexico, we were awarded exclusivity to negotiate 25 year US dollar-denominated PPA with private offtakers to build a 306 megawatt wind project and a 60 megawatt co-generation plant. These are our first Greenfield developments in Mexico in many years and we see a number of other good growth opportunities in light of the market reforms implemented by the Mexican government.

Lastly, we signed the acquisition of the 386 megawatts, Alto de Sertão wind farm in Brazil that we announced on our last call. This project will help diversify Tietê’s fuel mix and hydrological risk. With an average remaining contract life of 18 years, the project will also help to reduce future exposure to short-term price movements. This 600 million Real acquisition is being funded entirely with debt capacity at Tietê demonstrating once again our ability to utilize local debt capacity in order to grow our business and improve returns. Turning to Slide 16, this brings us to our portfolio, which we expect to generate 8% to 10% average annual growth in all of our key financial metrics through 2020.

This growth is largely driven by the completion of our projects under construction, our cost savings and revenue enhancement initiatives, lower interest expense, as we continue to delever, and attractive returns from recent acquisitions and our development pipeline. We see further upside potential if we are able to capitalize on the LNG and energy storage opportunities I discussed earlier. Turning to Slide 17, our portfolio will generate $3.8 billion in discretionary cash through 2020. This is largely driven by Parent free cash flow and the proceeds from asset sales. This internally generated discretionary cash is sufficient for us to meet our dividend growth commitment to fund our growth platform and reduce our corporate debt to achieve our strategic objectives.

Overall, we remain confident that we can deliver attractive growth to our shareholders through 2020 and beyond. With that, I will turn the call over to Tom to discuss our first quarter results, capital allocation and guidance in more detail.
Thomas O'Flynn: Thanks Andrés, and good morning. Today, I will review our first quarter results and 2017 capital allocation. Overall, we had a solid quarter benefiting from higher margins at many of our SBUs and lower tax rates.

We also generated strong free cash flow and made good progress on Parent debt reduction. Turning to adjusted EPS on Slide 19, first quarter results of $0.17, a $0.02 increase from 2016. The increase was primarily driven by the tax rate, which was lower than first quarter 2016 rate, but higher than our expectation for full year 2017. Operations were relatively steady as benefit from a legal settlement in Brazil and foreign currency appreciation were largely offset by lower contributions at DPL in Ohio. Before moving on, I want to touch on $168 million impairment charges again this quarter that are not included in adjusted EPS.

Almost all of this is related to the exit of merchant coal assets that Andrés mentioned namely, the 1.7 gigawatt sale in Kazakhstan and the planned shutdown of our 1.2 gigawatt Killen and Stuart plants at DPL in Ohio. Now to Slide 20 and our consolidated free cash flow and adjusted PTC. We generated $546 million of consolidated free cash flow, an increase of $56 million from the first quarter of 2016. That was also largely driven by higher margins, as well as lower tax payments in Andes and MCAC SBUs. We also earned $190 million in adjusted PTC during the quarter, an increase of $5 million largely driven by higher margins.

Now I’ll cover SBUs in more detail over the next six slides, beginning on slide 21. In the US, our results reflects slightly lower margins primarily due to the impact of major planned maintenance at Hawaii and lower contributions from DPL due to lower regulated ESP rates. Adjusted PTC also decreased due to a gain on a contract termination that occurred in 2016 at DPL related to its competitive retail business. Lower consolidated free cash flow also reflects higher purchase power and fuel cost at DPL. At Andes our results reflects higher margins primarily due to higher reservoir levels and generating volume in Columbia.

Consolidated free cash flow also reflects lower tax payments at Gener in Chile. In Brazil our results reflects higher margins, primarily driven by higher spot sales and energy prices at Tietê. Adjusted PTC also benefited from the settlement of the legal dispute at our CCBT Uruguaiana. Consolidated free cash flow benefited from these impacts, but was partially offset by the recovery of high purchased power cost in 2016 from prior drivers and our distribution business Eletropaulo. It’s worth mentioning that while we are expecting the low hydro conditions this year in Brazil, the impact will be much less than it’s been in prior years, due to changes we’ve made to our hedging strategy.

We are now 83% contracted in 2017, which leaves us well positioned to absorb hydro shortfall. In Mexico, Central America and the Caribbean, higher margins were driven primarily by higher availability in Mexico. Consolidated free cash flow also reflects lower tax payments in the DR. I’d also like to note that in the first quarter, the DR was awarded new five year PPAs to recontract 470 megawatts of existing capacity. The PPAs were awarded in a competitive option and our cost efficient plant with the only capacity to clear.

Pricing is in line with our existing PPAs and prior expectations. We are now 95% contracted for 2018 and 85% contracted for 2022. In Europe, our results reflects lower margins, largely due to the restructuring of the PPA at Maritza in Bulgaria in the second quarter of 2016. Consolidated free cash flow increased due to lower CapEx for environmental projects completed in 2016 and higher collections in the United Kingdom. Finally, in Asia, our results reflect steady margins and slightly higher working capital requirements at Mong Duong in Vietnam.

Now to Slide 27, an update on our filing at DP&L in Ohio. As you may know, last month we reached a settlement agreement with Commission’s staff and certain interveners in our EFP case. The agreement includes a distribution Modernization Rider totaling $105 million per year over three years with a two year extension earmarked for debt reduction. The ultimate goal is to transform DPL into a stable and growing T&D business. To that end, DPL has already announced plans to sell or exit all of its 2.1 gigawatts of coal-fired capacity by mid-2018 and is exploring strategic options for the remaining 1 gigawatt of peaking capacity.

Evidentiary hearing in the EFP case concluded April 11 with a final decision likely by late second quarter or early third quarter. We expect the ruling that will help DPL continue to reduce leverage and transition to investments-grade rating. Now to Slide 28, and our improving credit profile. Since February, we have prepaid $300 million of parent debt targeting our largest maturity with some of the highest coupons. This brings our total parent debt to $4.4 billion, which is a $2.1 billion or about a third reduction since September of 2011.

Our Parent leverage ratio continues to improve dropping from 6.5 times in 2011 to 5 times last year and to expect it 4.6 times by year end. Through discipline debt reduction, and strong growth in Parent free cash flow, we expect to attain investment-grade credit metrics by 2020. We continue to believe this will help us to not only reduce our cost of debt and improve our financial flexibility, but also enhance our equity valuation. Now to our 2017 parent capital allocation on Slide 29, which is materially in line with prior disclosure. Sources on the left-hand side reflects $1.5 billion of total available discretionary cash which includes roughly $625 million of Parent free cash flow.

As we discussed last quarter, in addition to $300 million we received from the sale of Sul in Brazil, we are targeting $500 million in asset sale proceeds. We continue to make progress on this target, although much of that may occur later in the year. Moving to uses on the right-hand side of the slide, including the dividend increase we announced in December, we will be returning almost $320 million to shareholders this year. We’ve allocated $340 million to prepay parent debt as I just discussed. We’ve allocated $382 million to our acquisition of sPower and planned to invest $350 million in our subs, the majority of which for new projects under construction and in late-stage development.

After considering these investments in our subs, debt prepayment and our current dividend were less with roughly $100 million of discretionary cash. Now to guidance beginning on Slide 30. Based on our performance year-to-date and foreign currency and commodity forward curves as of March 31, we are reaffirming our 2017 guidance and expectations for 8% to 10% average annual growth through 2020 for our metrics. As we’ve discussed previously, EPS growth in 2018 is expected to be higher than the average annual growth we are projecting through 2020. In fact, we are forecasting approximately $0.20 of EPS growth in 2018.

About a third of this growth is related to the 2.5 gigawatts or 75% of construction capacity coming online where our invested equity is approximately $700 million. These projects include the three CCGTs in the Dominican Republic, Indiana and Panama. About a third of this growth is being driven by our cost savings and revenue enhancement initiatives and operating improvements at our businesses. The remaining growth in 2018 is largely driven by contributions from growth in renewable through the sPower and the benefits of lower interest expense. With that, I’ll now turn it back to Andrés.

Andrés Gluski: Thanks, Tom. We have made significant progress in executing on our strategy by advancing our construction programs which is the key driver of our earnings and cash flow growth capitalizing on the advantages from our existing platform in markets where we have a strong position to make investments to ensure growth beyond 2020, rebalancing our portfolio to reduce risk and complexity by exiting non-core businesses and redeploying the proceeds consistent with our capital allocation framework, prepaying parent debt to improve our credit profile and achieving investment-grade metrics and optimizing our cost structure to improve operational efficiency and achieve our $400 million in annual savings target by 2020. With these actions, we are positioned to deliver average annual growth of 8% to 10% in all key metrics including free cash flow, earnings, and our dividend. Combining this growth and our current dividend yield will result in a total return of greater than 12%. We believe our attractive total return proposition will be better reflected in our share price as we continue to make progress on our strategic objectives and guidance.

Now, we will be happy to take your questions.

Operator: [Operator Instructions] Our first question today comes from Ali Agha with SunTrust. Please go ahead.

Ali Agha: Thank you, good morning.

Andrés Gluski: Good morning, Ali.

Ali Agha: Good morning, Andrés. First, just a housekeeping item, perhaps Tom, you had a 41% effective tax rate in the first quarter, are you still targeting 31% to 33% for the year? Any reason why Q1 was so much higher than that?
Thomas O'Flynn: Yes, we are still targeting 31% to 33%, first quarter was just the timing of certain events, but 31% to 33% is still what we expect to be for the year.

Ali Agha: I see. And then, second on the asset sale front, the $500 million target that you have for the year, the Ohio sale of $50 million and this Kazakhstan sale of $24 million, do they count against that or are they separate from that? And related to that, in the past, you told us that you resumed about a $0.03 earnings dilution from the asset sale primarily from the timing. Given your comments that the timing maybe later in the year, is that $0.03 dilution still valid for 2017?
Thomas O'Flynn: So, Ali, as we talk about asset sales proceeds, those are – that’s cash to corp.

So the DPL money will all be used within DPL to retire debt, so that would not count into that. The Kazakhstan $24 million would, and yes, you are right, we had said $0.03 to $0.04 from dilution. We now expect that to be later in the year some maybe $0.02 or somewhat less. That will be a bit of a help from a timing perspective.

Ali Agha: Okay, and thirdly, in terms of mapping out your full year growth profile and as you point out, there is a fair amount of free cash flow that you’ll generate over that period as well.

Can you remind us for the cash that’s unallocated at this point, what kind of return are you assuming on that cash that kind of gets you to that 8% to 10% overall annual growth rate CAGR?
Thomas O'Flynn: Yes, we are assuming cash in the – cash return in the high-single digits on that, which is consistent with our – at the lower end of our return on investments that obviously we could look at other things such as paying down debt or repurchasing stock.

Ali Agha: Okay, and last question, on the Colon project, with this ENGIE LNG contract, does that change your expected economics, the ROE that you resumed on that plant or was this already factored in into your overall ROE for that project?
Thomas O'Flynn: Yes, Ali, we have assumed quite – say modest use of the tank in regasification facility in our numbers. So to the extent that we can use, make more use of what’s basically existing capacity in the tank and in the terminal, that will be upside. So, with ENGIE in the Dominican Republic where we are using about 50% of the tank’s capacity, and in the Panama where we had basically 25% of the tank’s capacity being used, the sooner we fill this up, the better it will be. What is the upside potential? Well, if we utilize all of the existing tanks, say, by 2020 and 2021, that’s between – depends a little bit on the timing, but somewhere between, say $0.03 and $0.05 of upside.

Furthermore, we have the land that we could – and capacity at the terminals that we could, in each location build the second tank and that would be further upside potential. So we are very excited about this opportunity. We’ve been quite successful on our own selling gas in the Dominican Republic for transportation and for industry. We’ve done our first shipments in thermal tanks or really containers of LNG to other, another island in the Caribbean. So this is an upside.

We see that in the future, certainly ship bunkering will be important. We also see again more conversion of plants, industry, transportation in the Caribbean and in Central America. And with a strong partner like ENGIE that can provide structured products to offtakers, we are very well positioned, but we are just starting and that’s why we have very modest assumptions in our numbers.

Ali Agha: Understood. Thank you.

Operator: Our next question today comes from Julien Dumoulin-Smith with UBS. Please go ahead.
Julien Dumoulin-Smith : Hey, good morning.

Andrés Gluski: Good morning, Julien. Julien Dumoulin-Smith : So, quick couple of questions here to follow-up.

First on the SG&A reductions, you announced sort of an acceleration. Is that already reflected in your guidance as you see it for this year, and just to clarify that? And then separate, just the distinction, as you think about the 2018 uplift of $0.20 you discussed, can you discuss some of the other puts and takes? I am curious as to what the net EPS impact is of the divestment and/or sale, and the retirement of the DPL asset?

Andrés Gluski: Okay, let me take the first one. In terms of the first, this is what we have announced before, I mean, I think we’ve delivered, actually more than delivered every year in terms of the guidance we set out. So what we are saying is we feel very comfortable with the $50 million that we announced and is in our guidance for 2017, and an additional $50 million in 2018 and last time we also announced that we – that program will continue -- this sort of productivity improvements will continue in 2019 and 2020 although somewhat at a decelerated pace. So, basically, this is just a reaffirmation of what we announced before.

Now on the – sorry, the second question is in terms of, when you are talking about the dilution from the sale of the DP&L assets.
Julien Dumoulin-Smith : Yes, I was thinking, sorry, go for it.

Andrés Gluski: Yes, Julien it’s probably couple of things when you look at DPL it’s probably about a penny and obviously it depends upon terms et cetera. But maybe it’s about a penny in terms of the – what we are looking at, but that was all contemplated when we gave our guidance in February. I would say on a cash flow basis, DPL will be pretty neutrally cash flow EBITDA minus CapEx is pretty much breakeven as we see it through our forecast period even before other indirect costs.

Julien Dumoulin-Smith : Got it, excellent, and then can I just clarify, because I thought I heard you talk about an acceleration in SG&A. How does the classes of European and Asian business together fit within the context of SG&A? Is that still part of the 50 or is that actually going to potentially see some more of that 100 biased toward the 70?

Andrés Gluski: No, Julien, that is part of the 50 for this year and part of the 100 for the end of next year. So we will continue to take steps, obviously as we divest those assets, that also helps us to accelerate this process.
Julien Dumoulin-Smith : Got it. And to clarify for 2018, you talk about $0.20 of uplift, obviously DPL is not a huge impact there in terms of offsets.

What are some of the other known factors that we should just be aware of it, if you will?

Andrés Gluski: Well, I think, what Tom and I said, I mean, the main is our construction program. So we had three CCGTs that will be online in 2018 we have the cost-cutting program that we have announced and we’ve had the continued delevering. So those are the three main items that are going to contribute to the increase in our earnings and cash flow in 2018. Julien Dumoulin-Smith : Right, absolutely any other offsets there, so the $0.20 contemplates the construction program and doesn’t include the cost-cutting?

Andrés Gluski: Yes, it does. It includes all.

Julien Dumoulin-Smith : Okay, okay. So that’s a net number year-over-year inclusive of balance sheet SG&A and net contract degradation against growth?

Andrés Gluski: Yes, that’s correct. And like all of our numbers, that’s based on currency and commodities, forward curves as of today.
Julien Dumoulin-Smith : Right, excellent, all right. I’ll leave it there.

Thank you all very much.

Operator: Our next question comes from Greg Gordon with Evercore ISI. Please go ahead. Greg Gordon : Thanks, Good morning.

Andrés Gluski: Good morning, Greg.

Greg Gordon : I think most of this – most of my questions have been asked, but what I am looking at slide 53, and I am comparing it to your capital allocation slide. Your investments in subsidiaries is up $100 million versus the Q4 disclosure and it looks like your investment in Alto Maipo is up from $335 million of AES equity to $413 million. So that looks like it represents the majority of that increase. Am I correlating that correctly? And if so, does that in fact – taking into account the cost overrun or not because the footnotes still says it excludes the cost overrun.
Thomas O'Flynn: Yes that does take into account.

The full 20% cost overrun in Alto Maipo.
Greg Gordon : Okay, so that – so the footnote should have been excluded then starts it’s kind of a typo?
Thomas O'Flynn: Well, it’s an additional 100 in 2017 from Gener and we own 67% of Gener. Most of the financing again is coming from the lender and the minority partner. Greg Gordon : No, I understand that. I am just asking a very simple question.

In the Q4 deck you have $335 million invested, but the footnote saying excluding the overrun.

Andrés Gluski: Greg you are right. This includes the cost overruns. So there is a typo there, as you mentioned. Greg Gordon : Okay, so that typo should have been removed.

Great, I just wanted to clarify that. Thank you. And then – but overall…
Thomas O'Flynn: Greg, it’s Tom. First off, it’s impressive you saw the typo on Page 53. But just going back to your first question on the up 100, you are right in terms of investment subs.

It’s in smaller pieces, we do have a modest acceleration of our investment in Colon from 2018 to 2017, so it’s a part of it and then the other large part is an investment in renewable including sPower. That’s the biggest of the diff in that 100. Greg Gordon : Okay, great. So, we’ve got Alto Maipo, Colon and sPower and that represents the change?
Thomas O'Flynn: Yes, Alto Maipo is very modest for this year, because A, it’s funded by Gener, lower dividends, but it’s really not factoring into that, because it’s funded by Gener and it’s funded over the next couple of years. Greg Gordon : Okay, I understand.

Okay, so, when I am looking at Page 53 versus this year’s capital allocation, 53 is total not just this year, it’s happening over a period of time, that’s the difference.
Thomas O'Flynn: Correct. Greg Gordon : Okay, got you, perfect. And then also your – it looks like your total cash flow over the 2020 period, you’ve raised at the midpoint by about $100 million. Is that just because you’re accelerating debt reduction and retaining more cash from interest savings or is it a combination of other small things?
Thomas O'Flynn: Yes, combination of small things.

Andrés Gluski: Yes, probably, maybe just rounding. Thomas O'Flynn: Yes. Greg Gordon : Okay, thanks guys.

Operator: Next question today comes from Chris Morgan with Macquarie. Please go ahead.

Angie Storozynski: Hey guys, it’s actually Angie Storozynski. So, I didn’t hear any comments about Brazil. Could you say about – anything about economic recovery and the future of your utility there? Thank you.

Andrés Gluski: Sure, hi, Angie. In Brazil, what we are seeing is, last quarter, we saw flattening of the decline and this year we might seeing a slight pickup in demand.

But, more like 1% demand has decreased like 10%. So, overall, we are modestly optimistic about Brazil. The President is taking a number – on a number of the important reforms that it flow through, going very well for the country, but we expect a gradual slow recovery in Brazil. Now this year, they are having a drought and as Tom mentioned, I think, it’s a good example of how our change in commercial strategy and the level of contracting that we have had made it, quite frankly a very small issue, where two years ago it was a very big issue for us. And so, it’s basically the same asset I should say, but it makes a very big difference.

So, with the acquisition of the wins that will help provide Tietê with basically assets which are not correlated with hydrology which are contracted at 18 years at good prices. Now regarding our utility, which is Eletropaulo and remember we sold, Sul. What we are doing is moving forward on listing it on Novo Mercado and that is going well. And so basically, being on the Novo Mercado means, one share one vote and therefore we would no longer consolidate Eletropaulo in our numbers. Now the company has had a significant recovery in its share price this year and it’s continuing to make improvements operationally.

Angie Storozynski: Okay, and then, in Chile, so, thanks for the update on the construction progress on Alto Maipo. Is there – have you managed to secure anymore contracts for this asset? And also any indication on pricing for power, especially ahead of the next forward power auction?

Andrés Gluski: We have not secured anymore contracts for Alto Maipo at this stage. It’s part of the Gener portfolio. So, they have basically the Gener, it’s highly contracted through 2021, 2023. So we don’t have any immediate issues at Gener.

I mean, last year was a record year for Gener, both on earnings and cash flow. This year is also looking extremely good. So, what we are seeing, again, as re-contracting rates passes that window, what we’ve seen on the – we have signed some new contracts, especially one of our subsidies of Gener which is Guacolda and these were rates around 70. But we continue to see sort of a long run price in the sort of mid $60 per megawatt hour and that’s without assuming any sort of rebound in mining activity or more rapid growth of the economy. Chile is growing about 2%, 2.5% and traditionally it’s been growing more sort of at 4%, 5%.

So we have a pickup in economic activity. We think these prices could improve further.

Angie Storozynski: Okay, thank you.

Operator: Our next question comes from Lasan Johong with Auvila Research Consulting. Please go ahead.

Lasan Johong : Thank you. I wanted to ask a strategic question in a sense that, what – is it going to stay 2.5 to 3 gigawatts of new construction projects per year would jump your growth rates from around 10% to 20% a year?

Andrés Gluski: That will depend a little bit on – to what extent we have partnerships in those deals. This year, with the acquisition of sPower and some of the new things we’ve commissioned, we’ll be close to that number in terms of new projects and acquisitions. So, but it will depend on how much of those projects we own and whether it’s 50%, whether it’s 80%. We continue to plan to basically include partners on most of our big projects.

Lasan Johong : That makes sense and I am moving in. So, in terms of discretionary cash flow, you guys have about $1.4 billion through 2020. And right now, to what - less than over $400 million has been dedicated to new projects. So, if all of that remaining discretionary cash flow to be used for growth projects, is it correct to assume that you can reach that 20% type compound annual growth rate?
Thomas O'Flynn: No, that seems awfully high, quite frankly, no. One thing is very important, we will continue to be very disciplined in terms of our capital allocation and we were committed to growing the dividend, reaching investment-grade and continuing to decrease our risk on this portfolio from all factors.

So, that seems high. I mean, to get there, I mean if you had some dramatic improvements in some of the economies and commodity prices, perhaps, but we do have significant upside as I mentioned on LNG and which we’ve quantified. And on energy storage, we are continuing to work on that. We are making good progress and when we feel confident that we can provide some numbers, we will do so. But, again, this is our plan.

We will be disciplined and ensure that when we grow, it’s profitable growth. And all of our growth has to come on to our platform really has to – we have to be able to provide synergies or economies of scale or something like that before we do an acquisition. Lasan Johong : So, just a little clear, the $1.4 billion would not get you to the 20% growth rate?
Thomas O'Flynn: Probably, not, I mean, of course it really isn’t our goal. So what’s more important for us is to be disciplined, decrease risk and hit those – grow our dividend and improve our credit metrics. So, with that in mind, I don’t see it quite frankly.

Lasan Johong : Okay, then the flip side of the question is, once you get to a position where you think your risk is lowering off and the debt payments have gotten you to an investment-grade credit metric, what is going to be y our forward-looking strategy from that point on? Is it going to be more constrained on growth? Is it going to be maintaining the ship on course? How would you change that strategy?

Andrés Gluski: Well, when I think of the new strategy that we announced, based on the prior five year strategy, it would be an evolution of it. We think that the key elements are really having platforms, integrating renewable with existing capacity from thermal and hydro. And also being a leader in new technology. So, we are all about three months into the new strategy and we will update you next time. Lasan Johong : Okay, fair enough.

Thank you, Andrés.

Andrés Gluski: Thank you, Lasan.

Operator: The next today comes from Charles Fishman with Morningstar. Please go ahead.

Charles Fishman: Thank you, and good morning.

Yes, I had the same question, Greg did about the $100 million. But I can assure you I never would have seen the footnote error on Slide 53. Here is my other question that I got left. Andres, you talked on Slide 6, Alto Maipo, the problem is the tunnel. And tunnel on these type of projects can be certainly – you are not the first to experience tunneling challenges.

Of the 52% complete right now, what percent of the tunnel is complete? Or is that – are you talking about the tunnels? Is that the main part of the project or how should we look at that?

Andrés Gluski: That’s a very perceptive question. It’s 52% complete that includes all of the works and all of the equipment. On that tunneling we are more than a third complete on the tunneling. And basically what happened here is that the rock ended up being a less crusted than all of our projections and that’s what’s really slowed us down, because when you have to do more reinforcements you have to go more slowly and it was a bit surprising, because this is an expansion of an existing facility Alfalfal. So it’s in the same mountain.

It reterminates some of the same water. But that is what it is and as you are right, we are not the first to have encountered a different lock and what was expected once you start tunneling.

Charles Fishman: Okay, and then on Slide 6, I assume, that’s a tunnel boring machine we are looking at, is that the machine that’s actually in there now working?

Andrés Gluski: That’s exactly right. We have three of them in operation now, three TBMs and a fourth one on order that’s coming down. So we will have four TBMs operating on this site

Charles Fishman: Okay, so your – because it sounds like you are accelerating the thing to get it done.

Okay, good. That was the only question I had left, Andres. Thank you.

Andrés Gluski: Okay, thank you.

Operator: And we have our last question today coming from Gregg Orrill with Barclays.

Please go ahead.
Gregg Orrill : Yes, thank you. Can you walk through the details around the EBITDA guidance reduction for DP&L? I think it was obviously, you sold some of the generation assets, but it looks like it was down around $60 million from the fourth quarter?
Thomas O'Flynn: Yes, so, I think, what you are referring to is about $50 million drop, I mean, part of this is, as you know, Gregg, we have announced the sale of our coal-fired generation that accounts for about $30 million to $40 million. The total shutdown plus sale and then we also have incorporated updated non-bypassable, which is now $105 million versus what we were expecting, which was slightly higher than that. So net-net, I think that is – that accounts for most of the change.

Gregg Orrill : Okay, thanks.

Operator: This concludes our question and answers session. I would like to turn the conference back over to Ahmed Pasha for any closing remarks.

Ahmed Pasha: 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.

Thank you and have a nice day.

Operator: Ladies and gentlemen, the conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.