The AES Corp AES
Q4 2012 Earnings Call Transcript
Transcript Call Date 02/27/2013

Operator: Good morning and thank you for standing by. At this time all participants are on listen-only. After the presentation, we will conduct a question-and-answer session. I would like to inform participants that Today's call is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to turn the call over to your conference host to Mr. Ahmed Pasha. Sir, you may begin.

Ahmed Pasha - VP, IR: Thank you, Trey. Good morning, and welcome to the fourth quarter and full year 2012 Earnings call of The AES Corporation. Our earnings release, presentation and related financial information are available on our website at

Today, we will be making forward-looking statements during the call. There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors.

Joining me this morning are Andres Gluski, our President and Chief Executive Officer; Tom O'Flynn, our Chief Financial Officer; and other senior members of our management team.

With that, I will now turn the call over to Andres.

Andres Gluski - President and CEO: Thanks Ahmed. Good morning, everyone. We appreciate your joining us today. I'll begin with the quick review of our 2012 and then update you on our longer term strategy. Tom will then discuss our results and 2013 guidance in more detail.

On Slide 4, we've finished 2012 with strong operating and financial results, with adjusted EPS of $1.24. This represents a 22% increase relative to 2011 and is the highest adjusted EPS that we have achieved in the last 10 years. Similarly we recorded a 33% increase in proportional free cash flow.

These results were achieved despite headwinds at three of our larger businesses, AES Gener, Electropaulo and DP&L and reflect our commitment to pull multiple levers including share repurchases and cost reductions to deliver results.

Also in 2012, we made significant progress in executing on our strategic plan which we laid out in September of 2011. At that time we identified three primary objectives for enhancing shareholder value as described on Slide 5.

First, improving the profitability of our existing portfolio; second, narrowing our geographic and business focus through asset sales to simplify our story, reduce risk, and enhance our returns and third, optimizing capital allocation. I will review our progress on each of these three objectives since we started to implement the plan.

First, with respect to improving the profitability of our portfolio, we are focused on three key areas. As you can see on Slide 6, by rationalizing corporate overhead and development costs, we have reduced G&A expenses by $90 million. I am pleased to report that this is 38% more than our updated 2012 target of $65 million in savings.

We are also looking hard at lowering the operating cost of our businesses as discussed on Slide 7. To that end we have reorganized into six market facing strategic business units, or SBUs. This reorg will allow us to better align the businesses within each region, extract synergies across the portfolio and be more responsive to changes in the marketplace.

Building on our 2012 cost reduction efforts, we are on track to realize $145 million of recurring annual cost savings by 2014. The next area of focus is achieving positive regulatory outcomes and leveraging our commercial skill set and portfolio.

I'd like to provide a brief update on regulatory proceedings in Ohio, Brazil and El Salvador on Slide 8. At DP&L, our Electric Security Plan or ESP application is designed to balance DP&L's need to maintain its financial integrity with the Public Utilities Commission of Ohio or PUCOs desire for more rapid evolution to market-based rates.

If approved the proposed ESP will allow DP&L to collect a non- bypassable stability rider which along with other aspects of our filing will enable the Company to earn a reasonable return on equity.

In terms of the next milestones, we are currently in a settlement negotiations with various interested parties. In parallel, the formal EPS approval process is moving forward and the hearing in the case is scheduled to begin March 11. If we do not reach a settlement, we expect some FUCO to rule on our ESP filing through the formal process by July 6. In the interim, we are operating under our prior rate plan which was extended by the Commission in December of last year.

In Brazil, we are making progress on tariff reset for Sul. The review process commenced in December of 2012 and a public hearing is currently underway. The national regulator Gener recently released a preliminary proposal would suggest a slight reduction in the tariff for Sul using the lower weighted average cost of capital using all recent tariff cases. Gener is still reviewing other aspects of the rate filing. Once implemented in April 2013, the tariff would be effective for the next five years.

Finally, our distribution is in El Salvador received regulatory approval for their tariff for the next five years. The process in El Salvador resulted in a fair and reasonable outcome and is in line with our expectations.

Now turning to Slide 9, I'd like to comment on an example of how we are leveraging our footprint and commercial skills. Our 640 megawatt Uruguaiana combined cycle gas-fired plant is well-positioned to respond to the increased need for thermal power in Brazil. As some of you may recall, back in 2008 we suspended operations of this relatively new plant which was built around 2000. The suspension was driven by the lack of gas supply from Argentina.

With the efforts of our commercial and operational teams in Brazil and Argentina earlier this month, we were able to secure gas to run this plant through the end of March. Our team in Brazil is currently working on various alternatives to return Uruguaiana to permanent service.

Now turning to Slide 10, and the second objective of our overall strategy which is narrowing our geographic and business focus, we're executing on our plans that will not only resolve in the lower overall risk profile but it will also help us to shape a more focused and efficient company. I'm pleased to report that since September of 2011 we have executed diligently and we are on track to exit five countries including, the Czech Republic, France, Hungary, China and Ukraine.

We have announced or closed the sale of 14 businesses for total proceeds of more than $1 billion, at an average PE multiple of more than 20 times 2011 earnings. For 2013, we're targeting $500 million in equity proceeds from additional assets sales. Earlier this month, we announced our plan the sell our two distribution businesses in the Ukraine.

The price of the sale is $113 million. So, we're looking to sign another $400 million or so in asset sales over the balance of the year. We will be using the proceeds in line with our capital allocation framework. These actions demonstrate our commitment to streamline our portfolio so that we can focus on creating value in the markets where we have a compelling competitive advantage.

Now turning to Slide 11, I'll cover our third strategic objective, optimizing capital allocation. Growth in shareholder value remains the number one priority for our management team and I'm encouraged by the progress we have made to-date. In 2012 82% of our discretionary investments were allocated to debt repayment, dividends and share buybacks. More specifically since September 2011, we have prepared more than $700 million of debt, which not only reduced our leverage and our financial risk, but decrease our annual interest expense by approximately $40 million which benefit both earnings and cash flow. We remain committed to reducing our leverage and achieving a strong double BB credit metric over time.

Another lever to create per share value is to invest in our stock. To that end we have bought back 34 million shares since September of 2011, or approximately 4% of our outstanding shares or $390 million at an average price of $11.55. Today, we are announcing an increase in our share buyback authorization by $300 million, all of which is currently available. We also initiated a cash dividend for the first time in almost 20 years at an annual rate of $0.16 per share and we now have made two quarterly payments. From its current level, we expect to grow it modestly over time as we achieve our business and financial objects.

The third level of our capital allocation program is investment in our platforms. Before I highlight some of the growth opportunities that we are focused on, I would like to mention that as we've discussed in the past, we have implemented a very rigorous investment review process where each investment is evaluated against all of the alternatives on a risk-adjusted basis.

Additionally, our growth plans are focused on expanding from our existing platforms where we have a competitive advantage and we can benefit from enhanced have capital efficiency by deploying cash generated at the businesses or by using local capital markets. We can earn attractive risk-adjusted returns with our platform expansions as these projects are more efficient to develop, construct and operate than traditional greenfield projects in a new location.

Turning to Slide 12, we have 790 megawatts of platform expansions coming online in 2013 and 2014. AES' equity investment in these projects is approximately $280 million. All of these projects are expected to achieve commercial operations by the end of 2014 or earlier. So they will contribute to a full-year of earnings in 2015.

Based on our current forecasts, we're estimating equity and cash returns of around 14% from these projects in 2015. We see many similar opportunities to leverage our footprint. Here are some examples of potential platform expansion projects.

At IPL, our integrated utility business in Indiana, we're upgrading our base load coal-fired plants to comply with the Mercury and Air Toxics Standards or MATS as shown on Slide 13. This would require approximately $500 million of investments from 2013 to 2016 which will be funded by a combination of IPL debt and equity. We expect to earn regulated returns under IPL's environmental tracker, approval of which is expected by the second quarter of this year. We like this kind of predictable earnings profile, particularly when investment start earning cash returns during the construction phase.

In addition, also at IPL, we're looking to replace some of our small peaking plant where we cannot justify the additional investments required to comply with environmental regulations. One of the options is to build the 650 megawatt combined cycle gas-fired plant which would commence construction in 2014 and be operational 2017. If this option is approved by the regulator, we would start accruing earnings during construction.

On Slide 14, we have listed two near-term potential projects. The first is our 532 MW coal-fired Cochrane project Northern Chile. This project capitalizes on our existing platform and the continued expansion of Chile's mining and industrial sectors where probably demand has grown by more than 5% per year over the last 10 years.

We bought in Mitsubishi as a 40% partner and we expect to reach financial close later this year, immediately adjacent to our successful Angamos plant. The two projects will share some of the existing infrastructure, such as coal-handling and water intake facility, which helped to improve the return profile of this proposed project.

The 531 megawatt Alto Maipo hydroelectric project in Central Chile is another advanced development project. It is largely an expansion of our existing run-of-the-river Alfalfal facility. We have all major permits and contracts in place and the project is not only well positioned to take advantage of significant capacity constrains but it would also diversify our generation mix in Chile, which is currently 87% thermal.

We could begin construction later this year and we are strongly considering partners for the projects. For both projects after non-recourse debt and partner equity AES Gener would invest roughly $600 million and AES share of that investment is approximately $425 million. Half of our investment would be funded by reduced dividends from AES Gener over the next few years, which we have included in our guidance. The other half of the investment could be funded with AES Gener corporate debt, a local equity issuance in Chile or by additional equity from AES.

Turning to Slide 15, we have included details on two other development opportunities in our pipeline. In the Philippines we are currently developing a 300 to 600 megawatt expansion of our existing 660 megawatt Masinloc facility. This proposed project is well positioned to capitalize on the robust electricity demand growth in the Philippines, which has been growing at 3.5% annually over the last decade. Projected equity requirements from AES range up to $200 million and once again we may consider bringing in a partner.

Finally in India, we're making good progress on the development of 1,300 megawatt expansion of our existing 420 megawatt OPGC plant with low-cost, mine mouth coal, this project is expected to be a competitive supplier in a high-growth, fuel-short and capacity-short power market. The state government of Orissa is our partner with a 51% interest in this business.

The project has financing in place and is currently in the process of finalizing the remaining necessary land permits. We do not expect any significant amount of equity commitment in the near-term as most of the capital costs will be funded through non-recourse debt and cash being held or generated by the existing business.

In summary, there are significant platform expansion projects in our portfolio that will help grow the earnings power of our company. We will evaluate these potential investments against all other alternative such as deleveraging and returning cash to shareholders.

Now, I will turn the call over to Tom who'll review our financial results for 2012, discuss our business drivers in more detail and provide 2013 guidance.

Thomas O'Flynn - EVP and CFO: Thanks, Andres. Good morning all. As you may have noticed from revised format of our press release and slides, we're not presenting our results by SBU consistent with how we manage our businesses. If you had time to look at our 10-K, you'll also see that we've tried to provide an overview of the key drivers of each SBU.

We hope you will find these changes and additional disclosures useful and obviously welcome your feedback

This morning, I'd like to review our 2012 results including our performance against our guidance, earnings by SBU, proportional free cash flow and finally the execution of our 2012 capital allocation plan. Then I will discuss our 2013 guidance and plans for capital allocation as well as a brief update on our expected earnings trajectory for 2015.

On Slide 17, as Andres mentioned, we achieved our 2012 guidance on key metrics and delivered significant growth in earnings and cash flow.

Turning to Slide 18, we've included analysis of our adjusted pre-tax contribution or adjusted PTC in 2012. Adjusted PTC is essentially our pre-tax earnings adjusted in the same way as adjusted EPS. The pie chart displays the contribution of each SBU. As you can see, our earnings are fairly evenly distributed among our SBUs. Further, our list of subsidiaries AES Gener, Tiete and Electropaulo and public filers in the U.S. namely DPL and IPL account for a third of our adjusted PTC in 2012.

I'd like to point out – to make our financial disclosures more user-friendly, on Slide 36, we provide U.S. GAAP earnings, adjusted earnings and more relevant market values for our interest in our publicly listed subsidiaries. We now have these businesses filed their quarterly financial results in advance of us, so we can disclose their earnings contributions along with our results. For example, as of yesterday, the public market value of our interest in Gener was about $3.9 billion and our share of the 2012 adjusted earnings was about $200 million.

Our adjusted PTC increased roughly $300 million in 2012 largely due to our new businesses. We also had strong operating performance at our generation facilities in U.S. and Asia which I'll discuss in a moment. Partially offsetting this growth, we faced challenges at our Andes and Brazil SBUs due to lower spot margins and second quarter outages at Gener and the impact of the Eletropaulo tariff reset.

Now I'd like to walk through the key year-over-year trends for each SBU. Given this is the first time we're discussing our result by SBU, I'll remind you to key businesses in each. On Slide 19 the U.S. SBU includes our two utilities in Midwest IPL and DPL, as well as our U.S. generation business with 6300 megawatts of capacity across the country. Overall adjusted PTC grew by $229 million, of this $125 million was due to DP&L's first full year of operations as part of our portfolio.

In addition we saw growth at our plant in Hawaii and also with Southland through the temporary restart of Huntington Beach Units 3 and 4. In 2013 consistent with the earlier comments we expect a decline in U.S. adjusted PTC due in part to lower capacity prices and increased customer switching at the DP&L and also we have planned outages at IPL.

Next the Andes SBU on Slide 20 includes our Gener platform, which owns more than 4700 megawatts. In addition we have our businesses in Argentina. In 2012 Andes recorded a reduction in adjusted PTC of $139 million. In Chile GENER was impacted by lower spot margins due to lower energy exports from Argentina to Chile. In addition, partially due to outages in the second quarter GENER covered some of its contracted sales with higher cost replacement energy. These outages did not continue in the second half of 2012 as we successfully addressed the operating issues. These negative impacts were partially offset by addition of our Angamos plant with an adjusted PTC of $11 million and also efficient reservoir management at Chivor in Colombia.

Despite the short falls of 2012, Andes is positioned for growth in 2013, driven by Chile. Campiche or Ventanas IV reached full load in February and should achieve commercial operations in the next few weeks. In addition, we expect to benefit from higher availability due to the maintenance performance in 2012. Going forward, GENERs contracts are aligned with sufficient generation capacity. So it's less exposed to the volatility and spot prices.

Now to Slide 21, our Brazil SBU includes two generation companies and two utilities. In terms of generation Tiete is roughly 2,600 megawatts of hydro and Uruguaiana has over 600 megawatts of gas-fired capacity. On the utility side, Eletropaulo and Sul distribute power to Sao Paulo and (indiscernible) Sul, respectively.

In 2012 adjusted PTC from Brazil declined $94 million, with the largest impacts from a tariff reset at Electropaulo and the depreciation of the real. We expect growth from '13 with the initial restart of operations at Uruguaiana and a recovery at Electropaulo.

Next, in MCAC on Slide 22 we have our generation businesses in Mexico, Central America and the Caribbean. Key driver for adjusted PTC growth of R82 million in '12 was our new contracted hydro plant Changuinola in Panama, with an adjusted PTC increase of $80 million. We expect adjusted PTC from this SBU to modestly increase in 2013, reflecting the five-year tariff reset Andres mentioned in El Salvador.

In EMEA on Slide 23, we primarily have our generation businesses in Europe, the Middle East and Africa. Again our new business Maritza in Bulgaria account for most of the growth with an adjusted PTC contribution of $90 million.

One-time arbitration at Cartagena in Spain also drove some results, is the higher dispatch at Kilroot in United Kingdom. In 2013, we expect a decline in this SBU due to the non-recurrence of the Cartagena transaction and the impact of the sale of the Ukraine utilities.

The Asia SBU on Slide 24 is primarily comprised of our 660 megawatt Masinloc facility in the Philippines, our 1,240 megawatt Mong Duong II project under construction in Vietnam, as well as modest contributions from our 420 megawatt OPGC plant in India. We recorded an adjusted PTC increase of $102 million, primarily due to higher demand and favorable spot prices at Masinloc.

At the end of last year, Masinloc entered into a seven-year contract which effectively hedges 85% of its output. The contract includes a fuel pass-through and the revenue is denominated in local currency but is indexed to the U.S. dollar. It should reduce the volatility from selling in the spot market but at somewhat lower prices. With the decline, due to our China assets sales, we therefore expect a reduction in adjusted PTC from Asia in 2013.

Turning now to Slide 25, we've covered each of the SBUs representing $2.1 billion of adjusted PTC. Offsetting this, we have corporate charges including interest expense on our $6 billion of AES debt and most of our G&A expense. Year-over-year corporate charges increased slightly due to increased interest expense which was partially offset by G&A reductions.

In 2013, we expect a decline in interest expense as we continue to repay debt. In addition through our SBUs we're driving cost reductions as we achieve $145 million in annual savings by 2014. After adjusting for corporate charges our total AES adjusted PTC came in at $1.4 billion.

Adjusted EPS benefited from lower share count as a result of our 2011 and 2012 share buybacks. However our adjusted effective tax rate in 2012 was higher than in 2011. Importantly the 2012 tax benefit applicable for the retroactive extension of the CFC look-through rule will be recorded in 2013 results in line with the early January 2013 enactment date of the legislation. This benefit is about a ($0.105) for the first quarter 2013.

Now turning to Slide 26 our trends in proportional free cash flow were similar for the year with the result of $1.2 billion roughly one-third increase over 2011. The U.S. SBU accounted for most of this increase due to DP&L's first year of contributions, as well as improved operating performance and lower environmental CapEx at IPL. The Asia SBU also increased due to the strong performance at Masinloc. Offsetting these trends cash flow from Brazil declined as a result of higher working capital requirements and the impact of Eletropaulo tariff reset.

Turning to Slide 27 capital allocation I'm pleased to report that we delivered on the capital allocation commitments we made last year. First on the sources side we collected $600 million of asset sales proceeds during the year. We also generated $500 million impaired free cash flow. During the year 82% of our discretionary investments were allocated to debt repayment, share buybacks and dividends. In addition we invested $195 million in our subsidiaries, which is $67 million less than we projected on our last call.

Now, I'll address our 2013 guidance on Slide 28. We are narrowing our guidance to three metrics; adjusted EPS, proportional free cash flow and consolidated net cash provided by operating activities. We believe adjusted EPS is the most useful indicator of the ongoing earnings power of the Company. On the cash flow side, proportional free cash flow is most relevant cash metric as it measures AES' ownership in operating cash flow after maintenance and environmental capital expenditures.

Proportional free cash flow could be utilized for debt pay down; share repurchases growth investments or other purposes at the subsidiaries and the parent. In addition, we're providing consolidated net cash provided by operating activities to reconcile with U.S. GAAP. We hope this simplifies our targets for investors.

In 2013 we're projecting an adjusted EPS range of $1.24 to $1.32 per share. I'd like to point out a couple of factors to consider when looking at this guidance. It includes about a nickel of dilution from the $500 million of potential asset sales that we are targeting this year, including $113 million Ukraine sale, which was already announced. The impact of specific transactions could obviously vary, but we thought it was appropriate to include an estimate in our guidance.

In addition we've taken a closer look at the hydrology situation in Brazil and included a modest impact in this guidance range. While we do not provide quarterly guidance, we do expect to show a year over decline in the first quarter due to the $0.06 one-time benefit in Spain during the first quarter of last year, therefore we're anticipating earnings growth the rest of the year more weighted towards the second half of the year. Bottom-line, adjusted PTC at the SBU level is growing modestly, but is offset by assumed asset sales. In terms of other EPS impacts, we expect the benefit of about $0.03 and the impact of our capital allocation efforts.

In addition, we expect a lower effective tax rate this year as the CFC look through rule was extended for '13. Further our 2014 exposure to this rule is about $0.01 to $0.02. The proportional free cash flow, we're forecasting a decline of $300 million, which roughly $200 million is due to increased environmental CapEx at IPL and Gener. The decline is also driven by lower operating performance at DP&L and increased working capital requirements and Gener. We would expect this trend to reverse in 2014 and beyond as operating cash flow increases due to capacity additions and operational improvements.

Turning to our parent capital allocation plan for 2013 on Slide 29, we had approximately $300 million of cash on hand at year end. This slide reflects proceeds from announced assets sales of about $180 million primarily Ukraine. Again we expect the almost $400 million more in asset sales this year to reach our $500 million target that Andres referenced. But we won't add them to the plan on this page until specific transactions are announced.

In addition, we expect to generate approximately $400 million to $500 million of parent free cash flow. Therefore based on announced transactions, we're projecting discretionary cash of roughly $1 billion to $1.1 billion. In terms of uses, we plan to use $350 million for debt reduction and about 200 million for investments in our subsidiaries. That leaves about $220 million to $370 million to be allocated later in the year.

Our deployment of this cash will likely be combination of debt repayment, growth investments and share buybacks. As Andres noted, we currently have $300 million of the share repurchase authorization fully available.

Finally, I'd like to briefly discuss our total return expectations for 2012 to 2015. We continue to be comfortable with the 6% to 8% expectations we discussed last quarter. This includes annual EPS growth of about 4% to 6% and the dividend yield of about 1% to 2%. The midpoint of our 2013 adjusted EPS guidance reflects about 3% growth which is slightly below the three year trend consistent with our communications last fall.

One of the drivers of our earnings growth in this period is projects currently under construction, listed on Slide 30. Andres addressed the returns from the platform expansion projects that will complete construction in time to contribute a full year of earnings in 2015. Collectively we expect that this will add approximately $0.05 per share in 2015.

Our Mong Duong project comes in line in late 2015. In addition Mong Duong will be subject to lease accounting so cash returns are better than booked income in the earlier years. We do expect significant cash distributions beginning in 2016, and throughout the life of the project with a cash return in 2016 of about 19%.

In summary, we had a number of good achievements in '12 that provide a strong foundation for the future. I'm very encouraged by the commitment of AES people to deliver value to our shareholders.

With that, I'd now turn it back over to Andres.

Andres Gluski - President and CEO: Thanks Tom. Let me summarize our key messages on this call. Despite the significant headwinds we faced in 2012 we delivered 22% adjusted EPS growth and 33% higher proportional free cash flow. We are well-positioned to deliver on our financial objectives in 2013 and will continue executing on our strategy.

To that end we will continue to cut cost and improve the profitability of our portfolio, de-risk the portfolio through de-leveraging and narrowing our geographic and business focus through asset sales and allocate capital in the manner which maximizes shareholder value creation.

Before taking any questions, I would like to announce that we will be holding an Investor Day on Thursday, May 9 in New York. We look forward to seeing you there and in the coming weeks. Operator, we will now open the line for question.

Transcript Call Date 02/27/2013

Operator: Jon Cohen, ISI Group.

Jon Cohen - ISI Group: Just a couple of quick questions. So, the $400 million of targeted asset sales have you identified yet what those might be or is there something that you want to talk about?

Andres Gluski - President and CEO: Sure, Jon. I would say that in the past we have not given – talked about specific assets until the deal is signed and the reason for that, obviously, it affects the morale of the people or could also affect certain other things that are undergoing. So, what I would say is that what we will be selling are those where we give priority to those, where we have sort of one-off assets in a country, or where we don't really see that we have a strong competitive advantage or the opportunity for profitable expansion. The other thing is that we will be looking at really the total cost of running those businesses. So in terms of is it a business that drives a lot of overhead here for particular characteristics of that business. So I can't say much more than that, but that we have been continuing to work on that and to – what we will do will be very much aligned with our strategy as we've outlined and as we've done to-date, no, we're not going to do any sort of fire sales. I think we've been very judicious to make sure that we got the best value possible from the sales.

Jon Cohen - ISI Group: One other question, I was wondering if there anyway if you could frame for us the sort of swing factor in DPL based on what you filed and what the sort of status quo could be, so what's the sort of plus or minus in terms of EPS estimates in 2013 and beyond?

Andres Gluski - President and CEO: As I said in my talk we're in the midst of the filings right now. We also have interveners so I really can't give you any color at this stage beyond what I have already mentioned.

Jon Cohen - ISI Group: Just one last question, I also wanted to thank you Tom for these new disclosures. I think this is exactly what we needed. But the placeholder for $200 million of additional investments in subsidiaries, I think in the past, I presume a lot of that is going to Chile into Gener expansions. You had talked about equity – raising equity at the subsidiary level, how do you think about that just given where the AES stock is trading relative to Gener?

Thomas O'Flynn - EVP and CFO: It's a fair question John. A lot of good work by accounting team, the IR team and people in businesses to try to help our disclosures to be more user friendly, so thanks for that. The $200 million that's on the chart, the capital allocation chart that I touched on, that does not include Gener. That's really spread out amongst a number of businesses. I think 80% of it's in the top five, little bit to PALCO. We do have an energy storage project that we expect to do, but is not closed yet, and then we do an investment in Turkey and probably the largest one is the Jordan project. That started construction last year that's about $60 million. So the 200 is pieces of a number of things. With respect to Gener, Gener may do an equity offering they would do or may need to do that if they do both Cochrane and Alto Maipo and both those closed this year, just the size of those two projects may have them do that. I should point out Gener's not made any plans they're still in consideration of doing that. I don't want to get too specific because they are a public company and I don't want to front run their own dialog down in Chile with their public investors. That being said to the extent they do an equity offering our pro rata piece which would be 71% could be up to $200 million it could be less than that but our pro rata piece of that could be $150 million to $200 million range. So, we'll essentially assess the value of us participating in that versus our own stock. We're bullish on both stocks. So, it's a relative bullishness analysis. Obviously our stock trades cheap at the same time the Gener business has very good growth. So those are the kind of economic trade-offs I'll say that will go through. The only other thing I'd say is that we own 71% for some various governance issue it's beneficial for us to stay above two-thirds. It's not a requirement but there is some modest benefits so we'll take that into consideration as we do our thinking.

Operator: Julien Dumoulin-Smith, UBS.

Julien Dumoulin-Smith - UBS: First question just talking about Ohio, I suppose how do you think about that business structurally beyond resolution of the ESP I'm thinking '13, '14, '15, you've seen some of your peers in that state kind of re-evaluate their ownership with (MERC) and et cetera. I know maybe it's too early to tell, but kind of wanted to further out there?

Thomas O'Flynn - EVP and CFO: What I would say, there's not too much we can comment on and maybe Andy can just talk a little bit of sort of a plan between generation and distribution down the road.

Andrew Vesey - EVP& COO, Global Utilities: I think you're right there's not much we can say, but clearly, we're in the middle of both settlement discussions and preparing for a potential case. What you do know and I think is quite clear is that we have made a commitment in our initial filing to putting forward a plan for the separation of our generation assets in 2017. That said, once we either get a settlement stipulation or we get a rate order and we can evaluate where we stand, we will be very focused on how we're going to operate going forward. Remember and I think we've said many times before we sort of have three levers with Ohio one is the getting the right regulatory outcome which we're close to being at the end of that. The second is making sure that we build our retail capabilities so that we can efficiently place our generation. I think we are doing that and the third really is once we see where we land to make sure that we're optimizing around the costs and we'll be examining that once we get the outcome of the settlement or the case.

Julien Dumoulin-Smith - UBS: Then if you could talk broadly speaking just timing on expenses like what window specifically here are we talking to?

Andrew Vesey - EVP& COO, Global Utilities: Were you asking about…?

Julien Dumoulin-Smith - UBS: As to the Ohio ESP what's kind of timeline are we thinking about here for fully litigated case versus the settlement just…

Andres Gluski - President and CEO: A couple things – our comments both, let me say that actually today we are actually having a settlement meeting that's ongoing today, but regardless the current procedural schedule March 1st this Friday intervener testimony is due. We've actually put that back four days from the original schedule to give more time for settlement, the same with staff testimony, which is due on the 8th of March. The evidence you are remain schedule for the 11th. Now, depending on where we go, if we have stipulation to deliver by the 11th then we could see a decision as early as the first half of May. If we go through the full case than we are really looking about most likely concluding the hearings by the middle of April and looking for decision in the late June early, July timeframe? By statute, the commission is required to make a ruling on filed case 275 days after its filing, so we would be seeing a ruling by the commission on the case no later than July 6.

Julien Dumoulin-Smith - UBS: Then Tom, going back to financial, here if you will, when you talk about that pay down and you've talked about a minimum level that you described in your slide deck, how do you weigh moving forward the authorization that you've laid out today versus incremental debt pay down particularly as it relates to assets sales we purchased?

Thomas O'Flynn - EVP and CFO: It's a balance. I think the minimum debt pay down we have in our slide was really reflecting what we thought was reasonable to continue steady improvement in our credit profile. So, that based on the business outlook, we thought that was reasonable. In terms of going forward, we will look at -- first as we sell assets we do need to consider debt pay down as part of that obviously some of the assets -- really all the assets generate cash, so the sense if you would sell in asset and no pay down debt that would be credit dilutive. So, as a base case we tend to look at things as a starting point on a credit neutral basis, cash flow we generate what's the debt issue pay down to be credit neutral without that assets. That doesn't say that's the rule we end up, but that's at least the starting point. That does though leave you with what we believe is still meaningful cash and we will look at that maybe consistent with question I've got earlier on share purchased versus investment in Gener, I mean those are the things that we look at in terms of evaluation of the stock, in terms of what the attractiveness on a risk adjusted basis is of the investment be it in subsidiary or be it in the new asset. But bottom line I think we have room for all of them especially we load on more asset sales. I think we have room for increasing the debt pay down, increasing the growth investments above 200, if they meet the standards of being the good investment and also being implement some of our share repurchase.

Julien Dumoulin-Smith - UBS: Just to be clear about this when you think about assets sales and breakdown would you roughly think 50-50 split between debt pay down and equity…?

Thomas O'Flynn - EVP and CFO: That's a fair approximation.

Operator: Ali Agha, SunTrust.

Ali Agha - SunTrust: Perhaps, firstly for you Tom. Just to be clear you have mentioned I think there was I think about $0.03 of accretion you resumed in your '13 guidance from capital allocation. I wanted to be clear is that all assuming debt reduction or are you assuming any share buyback in your '13 guidance?

Thomas O'Flynn - EVP and CFO: Ali, it's really a function of what we've done, as well as what we'd expect to do. But it's frankly more a function of what we did in '11 and how that's already hitting us from the start of the year.

Ali Agha - SunTrust: So no share buyback incremental out of the $300 million is assumed in your EPS range, is that fair?

Thomas O'Flynn - EVP and CFO: Well, we do assume some capital allocation. So, yes, we assumed as we get cash, we're not going to put in the mattress. So, we do assume some balance of that the cash is earning either from paying down debt, some share repurchase and/or investments. I would say if we do share repurchase it will be more backend loaded. Our cash from the cash distributions we get tend to be more backend load and obviously to stand we're getting things with assets sales those who close in cash coming in the door more in the latter part of the year.

Ali Agha - SunTrust: Andres that the news flow coming out of Brazil have generally been negative for the last several months, apart from obviously the hydro, but just government statement the president's positions and statements, now you guys have been clear that your concessions are not impacted. But just in the sense of impacting the valuation of your holdings and hence your own stock price you clearly every time something comes out Brazil it takes, your stock takes a hit here. I'm just wondering are you relooking at Brazil, I mean what's your view right now in Brazil, under the current administration and because less attractive perhaps now given what we're hearing out there?

Andres Gluski - President and CEO: Yes, I think that put it this way, first if you think what we've done in terms of portfolio management in Brazil, you know we have sold a significant portion of our holding in Electropaulo, we started in 2006. We spun of telecom, so if you look at our holding today, in Brazil, the two largest components are quite frankly first Tiete and the second one is Sul actually. We have a large value we believe in Sul than we do in Eletropaulo. But we do get a lot of let say, we have to react a lot to the news in Eletropaulo, because it's a large publicly listed company, and of course we are trying to maximize the value for all shareholders including those of course of Eletropaulo shareholders, but having said that in Brazil, we have 2,600 megawatts of contracted hydro. We have a challenge in terms of what we do pass 2015. We are working on a commercial strategy there. We also have the opportunity for example of restarting Uruguaiana and we've done that successfully, now we have to have is a permanent solution. So, I do think there are opportunities for us in Brazil. I think Brazil – if you think of the medium term it's going to be growth market. And again I think we're well positioned. Now, again, if I think back, our think our strategy of focusing more on Tiete and trying grow generation and reducing our position in Eletropaulo for various reasons was the correct one.

Ali Agha - SunTrust: Last question, you seem to be on track for the 4% to 6% EPS growth you are now highlighting '12 through '15 or '13 through '15, you've also said in the past that your goal would be to get you back to the 6% to 8% that you had previously been targeting. How confident are you of perhaps getting to that higher lever and where – what would drive you to that higher level. I mean what new projects that are not there I mean how would you get from the 4% to 6% to 6% to 8% if indeed that is still an aspiration?

Thomas O'Flynn - EVP and CFO: Well, we're going to work very hard as we've said in the past to get back to that 6% to 8% growth. What are our levers, well, some that I can talk about right now are we continue to have the cost cuts, we continue to have the efficiencies of a simplified portfolio and that includes also better use of our synergies and we also have our own internal Six Sigma like apex programs which are also contributing a lot. So, I feel on the operational side I feel that we're doing a good job and that will add additional profitability into the future. The second if you've noticed when I talked about platform expansions our new investments, we are basically expanding from our existing platforms that takes less times, they have higher returns and especially risk adjusted return. So, I think we feel very good about what we're going to do going forward however we feel also that in terms of the guidance that we're committing today we're staying on that 4% to 6% rather than 6% to 8%, but we're going to really push to get there.

Ali Agha - SunTrust: But these things you talked about an expansion and maybe cost reductions, these are things that could actually help you in the '13 through '15 period or are you really talking about longer term beyond '15?

Thomas O'Flynn - EVP and CFO: Well, it depends, I think when we're talking about the efficiency of the overall portfolio it includes our G&A and also includes our cost of goods sold, those are immediate and so it depends on the type of extension we're doing to the platform. I mean its 20 megawatt battery storage that's going to affect in 18 months. On the other hand if it's building a significant addition to a new plant well, that's more sort of in 16, 17 framework, but realize we do have things like IPLs, environmental CapEx where we do get a track and that's also short-term. So it's the mix of things and as we said we are going to – we really feel that we are sitting on cylinders in terms of looking at all the levers that we do have to fulfill our commitments.

Operator: Charles Fishman, Morningstar.

Charles Fishman - Morningstar: I also wanted to thank you for the additional disclosure. Argentina, what got the additional gas there, was it more supply, was it better hydro conditions, what changed?

Andres Gluski - President and CEO: What we've been doing a number of restructurings at Uruguaiana in terms of the contract we did had over the past couple of years, but the main driver right now was the poor hydrology that they had was – in Brazil, which made more of interest to get the plant up and running. So we've had the plant up and running now, but as part of this we are working on a long-term solution to receive capacity payments at Uruguaiana. Again, we think we're well positioned. Again we took advantage of our presence in both countries and our relationships in both countries to get this. But we really came up with a win-win-win solution, which is win for Argentina, win for the Brazilian electricity sector and a win for us – and AES in Uruguaiana.

Charles Fishman - Morningstar: So what I think I just heard is it was also due to getting a better energy and capacity prices while there's gas being available?

Andres Gluski - President and CEO: Again, it was partly driven by the situation. We took advantage of the drought situation in Brazil. Andy, you want to add something to it?

Andrew Vesey - EVP& COO, Global Utilities: Just for clarity. There has been a change in the gas situation in Argentina. This was an initiative between the Brazilian government and the Argentinean government to sort a near term problem that Brazil was having from the drought. This is Brazilian gas being injected is LNG is coming into Argentina belongs to Petrobras, the Brazilian Company and what the Argentineans are doing are facilitating it's transmission they are re-gasing it and they are sending it to Uruguaiana, so this is Brazilian gas using the re-gas and distribution and transmission network within Argentina. That's really – the answer to the question that you asked, this is not Argentinean gas. This is Brazilian gas.

Charles Fishman - Morningstar: The 650 megawatt CCGT in Indiana that you were talking, would 100% of that be regulated under IPL?

Andres Gluski - President and CEO: Yes.

Charles Fishman - Morningstar: Then Masinloc second unit you mentioned there that you potentially start on, would you look to get a PPA before you begin construction on that based on the fact you just signed a seven-year hedge?

Andres Gluski - President and CEO: If you look at most – almost all of our project, I mean we're not building with the exception of Turkey, any sort of merchant projects, and that's just a characteristics of the Turkish market. But other than that all of our projects have PPAs and we do require very high levels of contracting before we start on a project.

Operator: Maura Shaughnessy, MFS Investment Management.

Maura Shaughnessy - MFS Investment Management: Couple of questions. First just on the IPL situation, in terms of the environmental spend, the $500 million fix up and the combined cycle plan that you just discussed, what is the – you mentioned that the environmental filing looks to be done by the second quarter. Are these due to street filings, what's the process in Indiana?

Andres Gluski - President and CEO: These are discrete, separate.

Maura Shaughnessy - MFS Investment Management: So when should we hear about that plant?

Andres Gluski - President and CEO: Andy do you want to give the details?

Andrew Vesey - EVP& COO, Global Utilities: Sure, Maura. It's Andy Vesey. Right now it's still in the process. And the process within Indiana requires us essentially to go after sort of an all source competitive bid and who can give us the least cost solution. One of those is our own option that we're contributing, which is this combined cycles self-build. There are a number of others. All those are under review right now. We will be providing a testimony in the first half of '13 going along with our filing of the CP&C. So that's the new generation piece. But the typical process is you file an application for certificate of public convenience and need and once that is improved you go ahead, because that's our certificate that requires whatever cost we are incurring we are going to be allowed to recover under a regulatory process. So, from that…

Maura Shaughnessy - MFS Investment Management: So remind me again what IPL is earning on a regulated basis that both the environmental piece and potentially the gas play would earn today, if they were approved?

Thomas O'Flynn - EVP and CFO: You may have set up, but the math would be part of a tracker. So you get recovery on it and the CC would be more traditional. The IPL's current ROE is a product of a settlement that's more than 10 years old and it was…

Maura Shaughnessy - MFS Investment Management: So it's more of the black box?

Thomas O'Flynn - EVP and CFO: Yeah, it's package deal, exactly.

Maura Shaughnessy - MFS Investment Management: So we don't need to discuss that right now?

Thomas O'Flynn - EVP and CFO: That would be – the tracker does have a return consistent with that package deal of black box as you say. The new plant, if approved, would then ultimately be subject to a rate proceeding closer or at the time when in service, so that's out in number of years and that would then be at ROEs consistent with Indiana practice at that time. So, you probably can see some of the standards. I'd be cautious about point to a specific precedent, but it would be generally consistent with Indiana ROEs at that time.

Maura Shaughnessy - MFS Investment Management: Let me jump to Brazil. So, we sort of had the hydrology freak show in November, December and January. I guess spot prices averaged in the 400s in January and February in the 200s. So things have slowed out a little bit, but as I understand it, the government is trying to potentially continue to run some amount of thermal throughout the year. Which given the amount of hydrology base it probably makes some sense. So, I was just wondering is there a chance that this deal with Petrobras via the Argentinian gets extended or the hope is that you get this one-off capacity payment which – yes, so I am just trying to understand that?

Andres Gluski - President and CEO: I'd say first, you're right, I think the government until the reservoir levels reach higher levels, I think 37% of capacity, they will run – continue to sort of force more thermal production. In terms of Uruguaiana specifically, our intent here is to really have a long-term solution. As Andy mentioned, what we really doing is we're really believe is totaling the gas to Argentina, because that's where the pipeline reaches. So, right it's a Petrobras is delivering the LNG by Avianca, but then we have other options going forward. So, what we really want is to have a long-term solution there and we working on that and so we would have options to where to source the gas where the Argentinians would get as a totaling agreement and the Brazilians would get additional capacity. So, that really is sort of the long-term solution. So, there is a short-term component, which is the current hydrological conditions, which facilitated this, then there is a secondary component, which is having a long-term solution to (indiscernible) we are working on that aren't in the situation to announce that yet.

Maura Shaughnessy - MFS Investment Management: So, in terms of at least for February and March should I assume that Uruguaiana however you say that is being sold spot prices since you hadn't obviously contracted on that since they not operate for a while, is that a fair?

Thomas O'Flynn - EVP and CFO: No, we are not making the spot margins on Uruguaiana. We are basically getting capacity payments on it.

Operator: Brian Chin, Citigroup.

Brian Chin - Citigroup: Just with regards to the situation down Sothern California and the SONGS situation. Can you just get a little bit more up to speed on what's going on with Southland, lot of headlines between yourselves, Edison and JPMorgan so just want to make sure we understand where we're at it?

Thomas O'Flynn - EVP and CFO: First some of the headlines, as we are trying to get the plant expansions permitted. We have a unique footprint there and we believe that they will have to be repowering of those plants, sometime over the next 10 years and that nobody is going to be able to permit new plants, so those locations are very valuable and very critical with stability. The second part of your question has to do with JPMorgan right and the tolling agreement. I don't know what we can say there.

Thomas O'Flynn - EVP and CFO: I'd just there is a smaller project of synchronous condenser project that we're trying to put in place for this summer that would be quite constructive to the area. It would provide some good stability, some additional power or working through some waivers and process with our solar and also utilities hasn't is also involved in that dialogue, at least those discussions have been going quite constructively. So, we're hopeful that we can get that all tied up and then get a synchronous condenser project operating in summer.

Brian Chin - Citigroup: Then lastly, just latest thoughts on timing of when you are going to revisit the dividend gain?

Andres Gluski - President and CEO: I would say that again, as we get more results under our belt, we will look at it periodically. I don't really want to commit to anything at this point in time.

Brian Chin - Citigroup: Understood.

Andres Gluski - President and CEO: With that I'd like to turn the call back to Ahmed.

Ahmed Pasha - VP, IR: We thank everyone for joining us on today's call. As always, the IR team will be available to answer any questions you may have. Thank you and have a nice day.

Operator: Thank you. Today's conference has ended All participants may disconnect at this time.