AES(AES) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EPS for Q3 was $0.42, down from $0.48 in the previous year, reflecting a $0.11 impact related to last year's insurance recovery and an outage at a facility in the Dominican Republic [25][24][38] - Adjusted pretax contribution (PTC) was $331 million for the quarter, a decrease of $95 million compared to Q3 2019 [26] - Year-to-date adjusted EPS was $0.96, compared to $1.02 last year, with a reaffirmed 2020 adjusted EPS guidance range of $1.32 to $1.42 [29] Business Line Data and Key Metrics Changes - The U.S. utilities segment saw demand at DP&L increase by 3%, while IPL experienced a 3% decrease, resulting in a net impact of only $0.01 on adjusted EPS for the quarter [24] - The South America segment's lower PTC was primarily driven by dry hydrology at the Chivor hydro plant in Colombia, leading to lower generation and higher energy purchases [28] - The company signed 2.1 gigawatts of new renewable contracts, increasing its backlog to a record 6.8 gigawatts, with nearly 40% of installed capacity now from renewables [10][12] Market Data and Key Metrics Changes - The company reported that over 80% of its earnings are now in dollars, providing significant stability to earnings and cash flow [23] - The LNG infrastructure business is expanding in the Caribbean, Central America, and Southeast Asia, with a focus on meeting growing demand for natural gas [15][16] Company Strategy and Development Direction - The company aims to achieve aggressive decarbonization, targeting coal generation to be below 30% by the end of 2020 and below 10% by 2030 [9] - The long-term strategy focuses on investing in sustainable growth, offering innovative solutions, and delivering superior results [10][21] - The company is well-positioned to meet strategic and financial objectives, with a development pipeline of 25 gigawatts in key markets [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving full-year guidance and noted that the portfolio has proven resilient amid COVID-19 [5][6] - The company expects to be at the top end of its guidance ranges for both adjusted EPS and parent free cash flow based on strong year-to-date performance [34] - Management highlighted the importance of regulatory developments and settlements, particularly at DP&L, which will allow for smart grid investments and rate base growth [27] Other Important Information - The company received a second investment-grade rating from S&P, which is expected to reduce the overall cost of capital [6][29] - The company announced a sell-down of 35% of its interest in the Southland repowering projects for $424 million, exceeding its proceeds target for the year [31] Q&A Session All Questions and Answers Question: Update on the Fluence process and timing for the sale of minority interest - Management indicated that the capital raise at Fluence is progressing well, with strong interest expected to be completed by the end of the year [35][36] Question: Clarification on the outage impact - The outage at a facility had a $0.02 impact in the quarter, but the facility is back in operation [38] Question: Earnings trajectory of the renewables business - Management noted that most earnings come from traditional businesses, with renewables expected to grow over time as older thermal assets are retired [40] Question: Guidance for the fourth quarter - Management highlighted several factors contributing to earnings, including rapid renewable growth and LNG contracting [43][44] Question: Clarification on coal generation reduction - Management confirmed that the company is on track to meet its coal generation reduction targets, with planned retirements and sales already in place [67][72]