Good morning, and thank you for standing by. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to your host, Ahmed Pasha, Head of Investor Relations.

Thank you, Effie. Good morning, and welcome to the first quarter 2012 earnings call of The AES Corporation. Our earnings 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. They 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 today this morning are Andres Gluski, our President and Chief Executive Officer; Victoria Harker, our Chief Financial Officer; and other senior members of our management team. With that, I will now turn the call over to Andres.

Thanks, Ahmed, and good morning, everyone, and welcome to our first quarter 2012 earnings call. Since our last earnings call in February, we have continued to meet with many of our investors as we visited Baltimore, New York and London. We had some great meetings, and I appreciate the direct feedback on our plans and strategy. Today, I would like to highlight some of the progress that we've made since our fourth quarter call. First, we're off to a good start with our first quarter results. And despite some headwinds, we are reaffirming our adjusted EPS guidance for the full year. Second, we're encouraged with the progress we are making at DP&L, including their market rate option filing and the likelihood of reaching a constructive outcome in a timely manner. Third, we have closed 2 more asset sales, Red Oak and Ironwood, for a total of $227 million in proceeds to AES. We have also signed an agreement to sell our interest in 379 megawatts of hydro assets in China subject to customary approvals. This represents additional equity proceeds of approximately $48 million. And fourth, we remain committed to using a balanced approach to capital allocation in order to deliver on our 2013 to 2015 total return goals. To that end, we have increased our current share repurchase authorization by $180 million, so we now have authorization of $302 million. Now turning to our first quarter 2012 financial results. As you may have seen in our press release this morning, we reported $0.37 in adjusted earnings per share for the first quarter, a 54% increase over the first quarter of last year. Similarly, our proportional free cash flow grew 51% during the first quarter. Victoria will discuss the drivers of our performance in more detail, but I am pleased with…

Thanks, Andres, and good morning, everyone. Today, I'll cover the following topics: our first quarter results in key drivers of growth margins; earnings per share; cash from operations and free cash flow; parent liquidity; and finally, our 2012 guidance. First, let's review our financial results for the quarter. Our proportional gross margin increased by $172 million compared to the first quarter of 2011. This was driven by the contributions of our new businesses, including Dayton Power & Light in the U.S., Maritza in Bulgaria, Angamos in Chile and Changuinola in Panama, as well as strong volume growth in Latin America. In addition, gross margin benefited from settlement of several prior period claims at Cartagena in Spain. These disputes were resolved earlier this quarter, allowing us to record a proportional pretax benefit of approximately $67 million. However, we also experienced some headwinds during the quarter. At AES Gener, lower spot pricing reduced margins in the SING in the Northern part of Chile. This is a significant trend we're experiencing this year, which I will cover in more detail when I discuss our full year 2012 guidance expectations. Beyond this, as many of you know, the tariff reset process for Eletropaulo in Brazil is still underway. However, on April 19, the regulator there issued a preliminary tariff proposal, which is lower than previously expected. To reflect our updated projections of the tariff reset outcome on AES, we increased our pretax regulatory liability to $162 million for the quarter, which includes a catch-up liability of $29 million for the second half of 2011. Relative to our previous expectations, this equates to an incremental ongoing $5 million impact to proportional gross margin per quarter as AES owns 16% of Eletropaulo. Turning to adjusted earnings per share. First quarter results increased by $0.13 to $0.37.…

Thanks, Victoria. In closing, we are executing on our commitments to our shareholders. A strong first quarter puts us on track for our 2012 target. We continue to sign and close asset sales, and we are achieving good valuations for shareholders while we simplify and streamline our operations. We are well on our way to achieve $50 million in cost reductions for this year and a total of $100 million by the end of next year. We have increased our authorization for share buybacks to $302 million and remain committed to an average 3-year total return of 8% to 10% from 2013 through 2015. I look forward to continuing our dialogue with investors and analysts, and we will be providing timely update on our progress. Operator, we will now open the lines for questions.

[Operator Instructions] The first question comes from Julien Dumoulin-Smith with UBS.

So first question here, if I heard you right, Victoria, you mentioned a reduction in the TIPRA impact. I would just be curious, what happened there to drive that?

Without going into a huge amount of detail on the call, we effectively looked at a number of the countries that generate the TIPRA related tax impacts for us and we have looked at changing some of the treatment relative to that from a reporting standpoint. It's not recurring in terms of the benefit, but we do believe if we don't get the extension, we can effectuate that in year, taking the impact from $0.12 to about $0.02 to $0.03.

Great. And on the DPL side, the first question, MRO versus ESP. It seems like the staff or PUCO Bradley wanted to -- seems to desire an ESP. Can you still settle the case even though you have an MRO in front of you? And how would that work just kind of logistically?

Julien, I'd like Andy to answer that.

It's Andrew Vesey. As you know, we did file the MRO because we believe that it was the best way to get a good consolidation of a lot of the interest that our MRO will deliver lower tariff rate to our tariff customers over time, including in 2013. It lines with the statutes in Ohio and advances the public policy to its competition. And for us, it really protects the financial integrity of the company and, importantly, allows us to emerge in this transition period as a viable competitor in the market. That said, the staff comments basically had indicated that they believe we could get all those outcomes with an ESP and, in fact, advised that we consider. And I think the words in their comments were strongly advised that we consider it because it had more advantages to us. But we're entering the technical conference -- the pre-conference hearings next week. We've had a very open engagement with interveners and with staff. I think our view is that there's enough commonality of interest that settlement is a possibility. And my sense is that as we move towards the evidentiary hearing in June, probably the best time to find some common ground. So we are open to the comments. We're open to proposals. Our view is that if we were to consider moving forward from an MRO to an ESP, we would only do so if it gave us the same benefits as the MRO does. And if the staff is correct that there are greater advantages, we surely would consider heading down the road of a settlement. And our view is that the settlement could be done in a timely way within the schedule laid out by the commission. So I think that's the way we're seeing it.

Great. And then looking at the SG&A and integration of DP&L, just on the cost front, clearly executing on that, but for the balance of the year and as you look into 2013, how does that kind of pan out for you guys? Maybe Victoria?

Go ahead, Andy.

Julien, it's Andy again. When we announced the acquisition, I think we said that we were looking to up -- somewhere around $40 million over time for that. We're making progress. I have to say since November, since we've got it, we've done a lot of work looking at all the cost, analyzing the opportunities and we've started to pull up some synergies. I think what will be helpful to us as we get through the case and we see how we come out, it will give us a better sense of the platform that we'll have and we're going to drive. My view is that within the next 2 years, we'll make substantial progress on that. As Andres had said, the approach at DP&L is 3-pronged and they're almost in series. The first thing we have to do is we have to get the case completed. We have clarity in a lot of the issues. At the same time, the next thing is to really continue to drive on the regulatory strategy. We've made a lot of changes. Adding Phil Harrington is a very important step for us with his competitive experience. We've integrated MC Squared into the retail function broadly at DP&L. We're doing a lot of operational sharing between our other businesses. And that will lead us then to such really drive cost out for 2 reasons: One is because I think across the business, we should do that. We have the capability at AES to do that. But secondly, because it will make us the much more able competitor in the marketplace. The answer to your question, I think we're on track with the synergy as we're looking at them and they will materialize over the next 24 to 36 months.

And Julien, as we said, really looking at it from a portfolio point of view, so a dollar saved is a dollar saved regardless of where it comes from. So we really want to bring -- to bear our synergies, economies of scale and operating know-how, but we really think of it from a portfolio point of view.

Great. And just a quick last one here, Argentina, there have been some clear news events about nationalization, just first, with regards to any read-throughs. And secondly, from a distribution perspective, the expectation had been fairly minimal regardless, right?

Yes. I mean, first -- regarding Argentina, we have good relations with the government. We've done a number of high profile projects, such as burning biodiesel, the president came to see it, and the CCGT, and certain other high tech. We have exited our distribution businesses, which is the most regulated. As you know, we sold 3 distribution businesses over time. So I think our situation is different from that of a YDF [ph], which has caused a lot of the news and had some particular circumstances around it. Now regarding the importance of Argentina to our portfolio, from the distribution from Argentina this year of $25 million and to put that in perspective, that's about 2% of our total. So we don't expect the material impact of any possible developments in Argentina. But as I said, we have a very productive relationship with the government.

The next question comes from Gregg Orrill with Barclays Capital.

I was wondering if you could hit TIPRA again just in terms of the offsets that you found, sort of what happens to the potential offsets if TIPRA is extended? Would you use those in later years? Or -- and I think you also said it was a onetime benefit, if I heard you right?

Yes, and I think we can -- it's probably not worth going through a huge amount of detail on this call, but it's relative to our tax filings relative to those particular countries that tend to generate the income for us that are TIPRA related in terms of the tax effects. So once we move down the path of doing that, it's not a duplicative set of benefits that we get if the TIPRA legislation is enacted later this year, but it's -- we don't have it on a recurring basis. It just would occur this year. And again, it would take a full year impact to about $0.02 to $0.03 from about $0.12 that we had anticipated before.

I think -- this is Ahmed. I mean, these are tax strategies, Gregg, I mean, that our tax group has implemented and they always do that. I mean, this is a tax planning at the end of the day that has helped us to write $0.06 to $0.07 in potential impact.

Well, I think it's important. I mean, we expect TIPRA to be extended. And what we're doing in no way affects sort of the -- it does get extended. There's nothing that we have lost as a result of these actions. We do realize that if it weren't to be extended, we could change the way we upstream cash from these big businesses in -- mainly the big businesses in Chile and Brazil as a result of this. But it's -- as I said, we said from the very beginning that we expected it to be extended. And we also said that we were working on offsetting strategy if just in case it wasn't extended. So we're fulfilling, I think, exactly what we said and we still think it's going to be extended just like it was in 2010.

Yes, that's good to find. In terms of the buyback, if you could, Andres, just kind of clarify what you were saying there about coming back to us on capital allocation later in the year. I wasn't sure if you were meaning to say that you weren't going to be buying back stock in the quarter for one reason or another because the cash wasn't available.

No, not at all. What I said is that -- as you know, in the fourth quarter of 2011, we're quite aggressive on our buybacks. We did not do any buybacks in the first quarter of this year. And the reason for that, as we said, is that we had to complete the acquisition of DP&L and then we wanted to pay the outstanding balances on our revolver. Going forward, as I said, we believe that at these prices, it's good value for us to do buybacks. What I did mention there is that all of the available cash that I had mentioned, the $1.3 billion, is not included in the additional asset sales. I think if we do additional asset sales and as we see the new projects progress, that 1/3 of the total amount, which is approximately $360 million without additional asset sales, they will be coming back and giving a greater clarity in terms of where we'll be using that money. So I hope that addresses it. I'm not saying at all that going forward, we would not be doing any stock buybacks at this point in time.

Our next question comes from Ali Agha of SunTrust.

Andres or Victoria, I wanted to be clear on your 2012 guidance update. And in your updated slide, I did not see any mention of the $0.06 that you picked up for Cartagena this quarter. So to be clear, are you excluding that from your guidance? Had that already been budgeted in the original because I don't recall that? So how should we be thinking about that? And should we look at $0.37 as kind of the starting point to get to the $1.26? Or should we be really looking at $0.31?

Okay. Let's start back. I mean, first, the Cartagena, $0.06 that was part of our guidance from the start. We've also had some onetime costs associated with the acquisition of DP&L. So it's not just -- our run rate, I don't it's fair to say just the whole $0.06. There were some offsetting a couple of cents in the opposite direction, so no. That has been part of our guidance from the beginning. And then the numbers that we're giving you, you're starting from the $0.37 for the numbers that we have given for the full year.

Okay, okay. I'll follow that offline as well. Second question, with regards to the projects and development that you laid out, can you just remind us the -- for the big one that you laid out, what is the equity contribution and to order from AES? When would those projects start contributing if they follow the schedule you planned? And what kind of return on that equity should we be thinking of in terms of potential earnings power from those projects?

Okay, that's a big question. Let me see and sort of put in pieces. I think when you're referring to the big budgets, you're not referring to like Mong Duong and Campiche because those were fully funded, right?

I'm talking about the projects in your slide that you had laid out in the development bucket.

Okay, the new one. So you're talking about Cochrane, you're talking about Alto Maipo and we're talking about Masinloc 2?

Yes.

Okay. Cochrane, the way to think about it as sort of cookie cutter, it's another Angamos. The -- right next door, and probably have the same equipment and maybe, say, contractor, similar offtake agreement with the mining company, one or more. So just think of the repetition of Angamos. In terms of the NPV created, for example, at Angamos, to give you an idea -- and again, I can't give you an exact number, we have target for Cochrane, not until we send all the PPAs and finalize the contract, but the NPV created at Angamos was about $300 million. And we're also expanding on the Angamos facility by putting a 20-megawatt battery, lithium ion battery facility there. Alto Maipo would be a very profitable project. It's a large project. It has a -- even though it's run of the river, there's a lot of construction involved. So that would -- if we -- starting now, this is a project which would come onstream around '15, '16. And so those are the 3 main projects. I think when you look at them from a -- so the other one, of course, is Masinloc 2. We -- so let me go back a little bit. So thinking of the 2 Gener projects, you're talking about probably equity needs of around $400 million over the next 3 years and that would come from -- locally through Gener's cash flow and other means. And then if we look at Masinloc, Masinloc does not have the same sort of support, which we're basically looking at a 630-megawatt expansion of the existing, current Masinloc facility. So you're probably talking about -- maybe half that amount, about $200 million. And that's a little bit less advanced than the 2 projects that are in Chile.

Okay. And then given your comments on the share buyback and capital allocation, Andres, and if I heard you right, you should be looking for more share buybacks over the course of this year and beyond. In the past, you talked about some headwinds and the timing of projects coming on that may cause '13 to perhaps not be on the same path as the '12 to '15 guidance you've been talking about. Should we now see that not necessarily to be the case and perhaps share buybacks could be one way for you to keep '13 on the same path that keeps you going, the 8% to 10% total return, '12 through '15?

What I was just following, if you look at this year, 2012, it's about a 20% increase in adjusted EPS from 2011, and that's obviously due to acquisitions plus new plants that were commissioned. When we look at '13, we obviously don't have that amount of new plants coming online. So it's not going to have the same sort of growth rate and nor have we said that our target is 8% to 10% every single year. Now we do think that if we -- executing on the share buybacks will help smoothen that path. But there is some inherent lumpiness in this business in terms of when the projects come online or when you execute on acquisitions, and also how quickly we can reinvest to the capital allocation process, additional funds from the asset sales. So what I would say here is that we're on track for 2012, and we're on track for the average growth rate from '13 to '15, and we'll update you as time passes. But we're not committing to an exact 8% to 10% every single year. And of course, that also includes our dividend payments. So that's -- we're really looking at a compounded annual growth rate in earnings, excluding dividends, of 7% to 9%.

The next question comes from Charles Fishman of MorningStar.

Just if you could explain some comments you made on DPL switching. The $27 million, was that year-over-year in the quarters due to switching? Or it was -- I didn't understand that $27 million.

That is in the quarter. Yes, and that's sort of the year-over-year comparison. So that was the -- let's say, looking at had there been no additional switching, what it would have been? So we look at a year ago quarter, then we're saying that it's up $18 million from the reduction that we had from switching a year ago.

Okay. And then if you are recapturing 78%, I believe I heard you say, and as...

That's correct.

If memory serves me, you were up on the high 80% level end of 4Q. If those numbers are right, is there an explanation for that? Is the competition tougher? Is -- can you add any color about what's going on?

Well, I can again -- I think that in general, there is more competition today than there was in the past and there's also aggregation. I think Andy can add some color on that.

Yes. Charles, Andy Vessey. You're right, when we think about it, what you're dealing with now is residential customers. And looking at a large commercial, industrial customers initially, we had a higher capture rate because we had a much tighter relationship they were in franchise. We had relationships ongoing. We had a high rate, not significantly high. We're still pretty good. So what you see is 2 things: One, you're seeing different classes of customers now. And now the competition is fully over at residential customers and they're coming either into markets or aggregation or sort of one-off door -- knocking on the door and getting an opt-in customer. The competition is increasing, so that's why the numbers have dropped slightly in the recapture. So our overall capture rate, if you work off the numbers that Andres has given us, is about 87% still affiliated with the DP&L brand, which is critically important because having that brand affiliation will help us with being able to place that generation going forward. So that's why it's very important for us to actually capture customers. I think one of the issues of aggregation, what we've seen here, is that it's going as we expected. There's been a little slowdown in the aggregation rate, meaning that actions haven't happened as quickly as we can, but we still think aggregation will move as we plan and as we expect. So that's -- it's pretty much playing out the way we're seeing it.

[Operator Instructions] The next question comes from Brian Chin of Citigroup.

Just a question on Slide 13, the AES Gener spot prices in Northern Chile. In prior Ks and Qs, you guys have identified that for 2012, you guys were expecting extra generation units in Chile to come online and that would suppress power prices in Chile. I had kind of assumed that you had baked that into your guidance, but when I see Slide 13 and you've got an extra $0.04 being there, that suggests that the impact from those plants coming online was a little bit bigger than what you guys had expected. Is that right? And is there further continued expected volatility in that, potential downside risk? Or can you give a little bit of extra color there?

Yes. That's not exactly right. What we're talking about was the fuel prices. I'll pass it on to Ned to provide more color, but that's really what's different from expectations.

Brian, it's Ned Hall. The units did come online and they did impact the market as anticipated. As you know, we long-term contract, the majority is somewhere between 70% and 90% of all of our capacity or reliable capacity. As Victoria pointed out, in this year, we have a step-up cover in Angamos from 65% to 90%. So we still have the market exposure. And what's changed in terms of the spot pricing in the northern grid is a number of people who -- or utilize gas signed up for take-or-pay LNG contracts. And they have modified their bidding behavior to reflect the fact that those are take-or-pay contracts, which lowered the overall clearing price in the market as a result of that. Those -- our understanding is most of those take-or-pay contracts expire in the last quarter of this year. We don't anticipate that people will make that decision going forward. So in addition to us stepping up into a higher contracted position to 90% of Angamos, we also think that spot market prices and exposures that we do have out, over time, will improve as well. Then this period, where we're 65% contracted in the spot price, came down, reflecting that bidding behavior. It costs us the $0.04.

Okay. So I guess, the right interpretation of that then is if the bidding behavior has adjusted to sort of a different level now in that space due to the remainder of the year, then your guidance would remain on track at about $0.26.

Yes.

Okay. And then -- I'm sorry to beat a dead horse on this TIPRA thing. But in the event that TIPRA is not extended and you guys are able to put in those mitigating treatment mechanism, is that just a timing issue? Does that just push out the effect of TIPRA into 2013 or 2014 and avoid it having to hit '12? Or is there more of a permanent effect that, that treatment has on long-term?

No. It's a temporary impact for 2012. If TIPRA is not expended, we would, as Andres said earlier, need to be taking broader actions relative to the - to subsidiary dividends that we get from the countries that generate that tax impact. So it's a temporary measure relative to that. It has a onetime, end-year impact for us. And obviously, if it's not extended, we will continue to look to ways to find to mitigate the $0.02 to $0.03 remaining, but it doesn't -- it's not a permanent solution to the -- a lack of a TIPRA legislative approval by the Congress late this year or in the future.

Yes. The thing is, if it wasn't extended permanently, then we'd have to take some other actions. But obviously, we're not going to ever take a $0.10 to $0.12 hit.

The last question comes from Tom O'Neil [ph] of Green Arrow.

Just a question on DPL, if I could. I was just wondering if you could decompose the switching by customer class that you saw this quarter. And I just wanted to clarify the absolute value of gross margin that you're talking about associated with that?

Okay. I think I can give you the breakout by customer class. I don't know by the quarter though.

Well, I mean, if you think about customer class, I mean, the fundamentals of the C&I customers have switched. You're not going to see much for that. That's being well saturated. What you're seeing is that what's remaining is that of our small commercial, about 52% have switched to date. And really -- where the action is really around the residential customers. As of the first quarter, only 21% or 22% of those customers have actually switched to alternate supply. So most of the competitive battle now is really for the residential customers and that's driven by just a lot of aggregation. In terms of the second question you asked, I really don't have those numbers in my mind. And so what I would suggest we do is that this is something we could talk about on -- I could get back to you with those after the call.

At this time, there are no further questions.

Okay. Well, we thank everybody for joining us on this call. As always, the IR team will be available to answer any questions you may have. Thank you, and have a nice day.

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