Welcome to the AES First Quarter 2016 Financial Review Conference Call. [Operator Instructions] I would now like to turn the conference over to Ahmed Pasha, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Dan. Good morning and welcome to our first quarter 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? Andrés Gluski: Thanks you, Ahmed. Good morning, everyone and thank you for joining our first quarter financial review call. Today, I will discuss our first quarter results and provide updates on our progress and our strategic objectives, macro conditions in our markets, and construction and development program. Since our last call in late February, we have achieved a number of key objectives for 2016. We received payment of all outstanding receivables in Bulgaria. We are on track to achieve our three-year $150 million cost reduction and revenue enhancement goals. We saw improvements in our credit ratings and outlook from the rating agencies. Our $7.5 billion construction program is advancing on schedule and will be the major contributor to our cash and earnings growth over the next three years. We continue to leverage our existing business platforms by advancing projects with long-term contracts denominated in U.S. dollars. During the first quarter, we achieved significant milestones on three new projects, which will contribute to our growth after 2018. I’ll discuss these achievements in more detail in the movement. But I would like to summarize our financial results on slide four. In the first quarter, we generated proportional…

Thanks Andrés. Good morning, everyone. Today, I'll review our first quarter results including adjusted EPS, proportional free cash flow, and adjusted pre-tax contribution or PTC by strategic business unit or SBU, and I'll cover our 2016 capital allocation, as well as our 2016 guidance. Turning to slide 17, first quarter adjusted EPS of $0.13 was $0.12 lower than 2015. Much of this decline was driven by factors incorporated into our full guidance, certain exceptions, primarily the decline in power markets in the U.S. as well as lower demand in Brazil. Specifically our results reflect the $0.04 impact from a significantly higher quarterly tax rate of 50% in 2016 versus 33% in ‘15. This was mostly driven by the timing of certain tax expenses, the largest of which was the enactment of income tax reforms in Chile. We do expect the rate to recover during the year to full year tax rate of 31% to 33%. Next, the $0.04 impact from devaluation of foreign currency is expected primarily in Latin America and Europe. And also $0.05 lower contributions from SUBs mainly due to anticipated drivers such as the expiration of Tietê’s PPA with Eletropaulo. In addition to the drivers included in our expectations, we also saw some softness in power markets and mild weather in the U.S. That being said, we’ve seen some recovery in prices in the last month, which will contribute to our stronger second half of the year and helps give us comfort in our full year outlook. Now on slide 18, our overall results were primarily driven by lower margins in our Brazil, Europe and U.S. SBUs due to factors I just mentioned. Generated $253 million in proportional free cash flow, a modest decrease of $12 million from last year reflecting lower margins, mostly offset by higher…

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Ali Agha of SunTrust. Please go ahead.

The first question, Tom, you alluded to the fact that while the tax rate and FX drivers in the first quarter were pretty much on plan, the U.S. and Brazil results were somewhat below plan. Could quantify how much below plan from an earnings perspective Q1 ended up?

Yes. I think if you single out those two, it’s probably $0.03 to $0.04 probably split between them, probably about $0.04 equally split.

And you alluded to some offsets in the second half; would they be cost reduction related initiatives or what would be offsetting them in the second half?

Truly list that one through recently cost reductions, a part of the $50 million we are expecting to get as part of our savings plan is more heavily weighted, but truly all the things.

I was talking about that last bucket line, which you had mentioned in those lists of things which were not really listed in more detail, you said more to come on that.

Yes, those will likely be in the second half, the things that -- two things of particular that we are working on to offset these issues and certainly not appropriate to give a lot of color on it, at this point, which I appreciate, people like get more color but we expect to give more color as they materialize in the second half of the year.

Yes. Separately, where do we stand on the Sul, transaction and what's the timing we should be expecting on that? Andrés Gluski: As we said last time, we injected $75 million into Sul, we restructured the debt, and we are looking at all options now for Sul. At this point, I really can't comment anymore about that.

Okay. And lastly, on Ohio, Andrés, as you mentioned the non-bypassable, you feel, keeps you out of the FERC review, but that still would keep the volatility of that business around. The beauty of the PPA was that it would take volatility out. I am wondering, have you looked at some of the recent filings that some folks have gone back in to try to keep FERC out and yet also keep volatility out or those would be of interest to you? And separately, if non-bypassable is the only way to go here, would you come back to the notion of potentially selling those assets again to get out of the commodity-exposed business there? Andrés Gluski: I would say that, again, we believe that our proposal avoided some of the issues raised by the PPAs. We continue to feel that that’s the correct path to go and we feel optimistic. We feel it's in everybody's interest. So, at this point what we would like to do is we continue to go with that path. And you are correct that there is a certain amount of volatility due to the on contract nature of the generation assets at DP&L, [ph] which is separate from that. But we have to -- especially if we get the non-liability rider, we have to think of it as an integrated business at that point.

But these other filings that I think FE and others may have made in response, would any of those be of interest to you?

Yes, Ali, what we have filed is not much different, what they have filed as a new case, if you wish, because we filed is not -- if you look at our plan A, which is not much different what FE has recently filed.

Okay, we would talk more of that offline. Thank you.

And our next question comes from Julien Dumoulin-Smith of UBS. Please go ahead.

Perhaps, just starting where Ali left off, can you remind us just what the benefit embedded in Ohio is of continuation of the ESP structure et cetera, or whatever structure ultimately is approved there in guidance? Andrés Gluski: Given a wide range in our guidance I think, so what we have embedded in there I think is a reasonable amount going forward. But as we say, we do have somewhat of a wide range to this. And that’s -- I don’t Tom, would you like to add anything to that?

I think, Julien we have said before, we’re obviously in the middle of our filing and working through it. So, we are careful about too much detail here. But I think we said before we have got a 110 now on in our ESP. We have incorporated something and it will be less than that amount into our ‘17 and beyond numbers. But, it's still a meaningful number, but it's certainly less than what we currently get.

And then turning to the Chilean tax rate change, obviously it's a first quarter item, but as you think about it more structurally, what is that impact in ‘17, ‘18 et cetera, just on an ongoing basis?

It's nothing. We headed into our guidance; it was unclear when the final legislation would be final, final, so be recognized. So, it's about $0.03 to $0.04; we fully expected it in our guidance for ‘16. It's just happen to fall in the first quarter because this final, final in Chile. What is it, it’s revaluation deferred taxes, the tax rate goes up slightly; so, it's a modest revaluation of deferred taxes. It's similar to what we did two years ago, I believe, ‘14, I think it was Q3 of ‘14 as I recall. It’s a similar deal. So, this is a second phase of that same legislation that came in shortly after President Bachelet took office.

And then turning to the asset sales, obviously you were very active in the first quarter here; kind of hit your annual targets already. Can you comment more broadly, I forget talking about specifics like Sul, but ambitions to continue to pursue equity sale downs? And also if you think about the ratio of buyback versus asset sales proceeds, should we assume for the most part they’re going to be earnings neutral for the course of what you’ve announced already and then prospectively? Andrés Gluski: We have announced in the past that we would be selling likely on average of $200 million to $300 million in equity proceeds to us of sale downs and getting out of certain businesses. And we continue. I think we’ve quite frankly outperformed the numbers that we have given in the past. Now, we don’t comment on them. But, what we would be doing again is fine tuning our portfolio to have really sort of an optimal mix, optimal mix of risks and position. So, we will continue to do that. And in terms of what we do with the proceeds, we’ll continue to allocate them as we have in terms of a mix, whether it’d be new investments and debt pay downs. And we’ll see what the circumstances are. As Tom said, I think it’s more of a -- we’ll have more of an emphasis on the growth of dividend than we’ve had in the past.

Got it. But give that you’re at seemingly the midpoint of that 200 million, 300 million, you’re saying that you’ve outperformed, so you wouldn’t necessary rule out further asset sales clearly? Andrés Gluski: No, absolutely not, absolutely not.

And what is the earnings contribution loss from the asset sales seen thus far? Andrés Gluski: We have in our forecast through 2018, we have modest decrease in earnings from those sales, because first you never can deploy the cash immediately, and it depends on the assets you’re selling, its risk profile, whether it’d be accretive or dilute.

And our next question comes from Chris Turnure of JP Morgan. Please go ahead.

I appreciate that you don’t want to give us too much detail on the Sul transaction or the potential of Sul transaction, but would you be able to give us, maybe the trailing 12-month EBITDA contribution from that business or PTC and then tell us how much debt is associated with that asset right now?

The PTC contribution from Sul is -- it’s modest, to be honest, it was a modest negative in the first quarter of the year. And last year, it was probably a couple of pennies of PTC, but it was -- right now, the way Sul is running, it’s a negative PTC. In terms of debt, we had -- it’s about $275, $300, around $300 under the exchange rates, roughly in my head when we paid it down, we got it down to about 275 in dollars.

The debt is in reis?

Yes, the debt in reis is obviously, I’m doing the math in dollars; but call it $275, $300; it’s all in reis, so call it then 1,100, 1,200.

And you’re done with the recapitalization of that asset as of now?

Yes, we put in 300 million reis, shortly after our last call paid down some debt, and we get covenants in that part of significant amount of time. Yes.

And then my second question is about kind of I guess 2019 and beyond. I’m wondering, one, when we would potentially get more color on earnings that year in cash flow that year, and kind of terms of your overall growth rate and what that would mean specifically? And then I also wanted to understand, within I guess that question, the contracting structure of some of your success here on the LNG side. You have clearly at least in Panama one particular power plant where you have a 10-year contract. So, I guess I understand that. But, then how do you guys think about the risk and the structure of the actual importing of the LNG and the regas there and the selling of that to third parties? Andrés Gluski: Okay. We tend to give our longer term forecast in February of -- so that will be in next year when we sort of move out an additional. What we wanted to do was give your color that our growth will continue post 2018 and fact that we have a good pipeline through 2020 that we recently added to. So that was really the point of this call. Now, talking about the facility in Panama, Colon facility, so it has two parts, as you said, one the 380-megawatt combined cycle gas plant, with a ten year PPA with the credibility offtaker in dollars; and the second is a tank. And the tank, we’re using about a quarter of the capacity for this plant. This leads about three quarters. So, it’s really a question of tolling; we are not going to be taking commodity risk on this. So, this could be tolling fuel for other power plants. We did this in the Dominican Republic, we’re using it. We’ve built a pipeline…

That’s very clear. It sounds like this would be within your risk tolerance or your risk profile of contracted assets, kind of at least medium term in duration and beyond with no commodity risk?

Yes, that’s exactly right. And with some of the people who would be using these tanks, we would expect to have contracts as well, basically assuring a certain amount of capacity from our tanks.

And our next question comes from Angie Storozynski of Macquarie. Please go ahead.

My first question is so, this Panama CCGT, you mentioned it's going to start operations in ‘18. Did you have it previously in your earnings expectations for ‘18; and if that's what's actually causing the guidance to move towards the high end, the percentage wise? That's one. And two, could you comment, if you have any earnings contributions for Sul and Eletropaulo in your guidance in ‘17 and ‘18? Andrés Gluski: So, I'll take the first. No, this was not in our guidance previously. Now, realize that the power plant will come on line late in ‘18, so really won't have any effect on ‘18, it’s really ‘19 forward. And the storage tank will become fully operational in ‘19. So, this is outside the window that we have given in the past. Regarding -- I think Tom can talk about the contributions of Sul and EP.

Yes, just to put a fine point, I think Sul has been running at loss and it’s been running at loss really since middle of last year. So, last year, it was down about 20 million to 25 million PTC and this year, we’re forecasting similar numbers. As we look at Sul, the earnings are -- we don’t have Sul in our forecast for ‘17, and inflection point for Sul will be their rate, the next rate case, rate adjustment mechanism, which is in spring of ‘18, that’s if we were to retain the business. In terms of Eletropaulo, the earnings were also very modest. We do have Eletropaulo, we do continue to have it in our business but its contributions are between $0.00 and $0.02, depending upon your forecast for Brazil. So, it's fairly modest number.

And our next question comes from Steven Fleishman of Wolfe Research Please go ahead.

Just a brief question on the Ohio plant. I know we had the FERC decision regarding the PPAs, but we also had a decision, not too long ago on AEP's ESP by the Supreme Court that kind of might arguably be comparable to the plans you filed, so do you have any thoughts in context of that decision? Andrés Gluski: I thoughts are quite frankly, we see that our filing, we think has been the correct path to take and we think it's within the PUCO’s purview to grant because we think it's a very similar to what we currently have in the ESP. So for those reasons, we remain optimistic.

And then just on the longer term drivers, you've given great visibility on the growth drivers and particularly new projects. Just to fill out the picture, are there any visible cliffs or roll offs over this period that we need to match against the growth projects or are those pretty much kind of done with at this point? Andrés Gluski: I would say that the only one we have is really Southland, that’s where are repowering. That’s more in sort of 2020 timeframe that we have the roll ups. And I'd say that that’s basically -- and in DPL, we have the -- our application for 2017 would eliminate any such cliff at DPL. So, we have nothing else major out there.

Yes. Steven, this is Ahmed. Just on DPL, our PPA expired in ‘18 but we still operate the plant through 2020; and in 2021, our new plant comes on line -- Southland, sorry. Andrés Gluski: This is Southland. So, that’s the only when have we are PPA expires, so we are going to repower the plant.

And our next question comes from Brian Chin of Bank of America. Please go ahead.

A question for you on the batteries’ segment, which is one of the more unique aspects of the Company. You mentioned that you’re seeing growth through two paths. Of the 394 megawatts in operation construction or late development, is there a way you can break out between what AES owns versus build by AES or is that all AES owned projects you… Andrés Gluski: Those are all AES owned projects. So, we don’t have -- we are working very hard on these third-party sales. We have a lot of interest in projects we are working on, some with channel partners, some on our own. And we hope to be giving you news sometime within the next six months. This is in many cases -- we're quite frankly creating the market because we are talking with regulators to make sure that the regulations allow compensation for battery-based energy storage. So yes, that’s 100% our projects.

And then, I know because the market structures are still under development, each project is sort of one-off situation. But, in terms of modeling this growth area, can you give us sort of rules of thumb about how to think about any modeling data points, for example like dollars per KW or return levels, just anything that we can use to try and get a little bit more specific on that? Andrés Gluski: First, it’s the way we are looking at it. I mean -- and you are correct, I mean, in some cases, we are putting up relatively small projects, sort of 10 megawatts, 20 megawatts to open up a market. And a lot of the return we believe will come from third-party sales. Now, we also are seeing some markets that are more competitive, and you have basically very rapid build out energy-based storage. And so returns come down. We have others, but we are looking at sort of long-term contracts. So, I think that the way we would look at the returns is that we would expect to earn on average the same as we earned in our other projects. We are not subsidizing this business. What will be new for us, quite frankly is the third-party sales, because there we don’t have to put in any equity; essentially, we are using our intellectual property rights and our experience and the brand name of Advancion. So, it's a -- we have it quite frankly incorporated, the third-party sales, because we really want to get a good feel for what they will be like. But, with our channel partners, we are really casting a wide net. And we will see I think over the next 6 to 12 months much clear how big that business could get.

And our next question comes from Lasan Johong of Auvila Research. Please go ahead.

Thank you. Okay. So, Andrés, I want to ask Julien's question slightly different way. How long do you think AES to sustain this 12% to 16% growth rate beyond the ‘17, ‘18 expectations?

At this stage, it's a little bit -- we are not ready to provide, guide sort of four, five year guidance out. I mean obviously there is a lot factors there that would influence this; what are forward exchange rates going to be, what are commodity curves, energy prices. But, what I think we feel very confident saying is we are not going to sort of run out of growth projects in 2018. We already have significant projects that will come on line 2019, 2020. And we continue to work on ways to accelerate that rate of growth. And part of it is our use of partnerships and our sell-down of assets to continue to turn capital into higher growth, higher return projects.

Well, is it at least fair to say that AES has now come out of the restructuring mode that’s gone on for about a decade and now we are back into the growth mode; is that at least a fair treatment?

I think in terms of cash flow and earnings, it's a fair statement. That’s how we measure success, honestly; we not going to measure in terms of megawatts. And I think we are going to remain the very disciplined Company that we have been, certainly over the last five years. We are going to be very disciplined and make sure that again not fall into any sort of rapid growth for growth sake, I mean we really want to maximize. And I think one of the things we have shown is that we are willing to have less megawatts and less clients under operation, but have a better risk profile and a better growth profile. That’s really where we want to go.

Okay. Switching to Panama, is it fair to say you are looking at the source of LNG for the plant in Gulf of Mexico?

Yes. We have a contract through 2023 for gas from Trinidad for the Dominican Republic. In terms of the source of gas for our share, the 25% that we will be using, we have a contract with one of the big suppliers. They can source it wherever they feel best. Probably some of it will come from the U.S. liquefaction facilities in the Gulf. And then when they are -- we feel at the tank and other people are utilizing it and they are taking the commodity risk, it's up to them where they will source it.

Okay. So, it's coming from [indiscernible] model and not directly from this plant?

That’s correct, unlike the case in Trinidad that we’ve seen, but it was very directed and it was coming from Trinidad at the point, or initially. Now they have optionality.

Okay. A quick question on Brazil; there are very interesting assets, upper river of Paranapanema where AES's long said that controls that because it provides tremendous benefits, both in terms of cost as well as upgrades and development opportunities. It’s on for sale, any comments? Andrés Gluski: I think that it’s true that Paranapanema which is owned by Duke in Tietê were once one company and was split in two. Having said that, what we’re looking at our complete portfolio, in terms of our risk profile. We have right now a lot of Brazil hydro risk. So, this really isn’t, we think in our sweet spot at this point in time. And we also understand that they are going to sell the whole package together, of all the other assets. It’s a pretty big ticket and there are other assets that we’re not interested in. So, what I would say is that really at this point, it’s not something we are actively pursuing.

Last question on Brazil, Brazil’s been long in recession/mild depression for the last couple of years. Do you think the Olympics will help bring it back out of that mode and back to a more possible economic profile or do you think it’s need a political change to get that. Andrés Gluski: I think that the Brazil is a much more diversified economy than perhaps it gets credit for. I mean as you look at the GDP of the state of São Paulo, it looks more like Belgium than it does to some of the Northeastern states of Brazil, so to realize that point. Now, I think that Brazil got itself into the some funk, some policy issues, not just commodity price drops. So, the good thing is that they can work their way out of it. Our view is that they’ll probably take a couple of years at least for Brazil to get out of it. I don’t think that the Olympics will have any effect whatsoever. I think the key point.

Really? Andrés Gluski: Yes, I really think that. The key point for Brazil is, determine the political process; who is going to be the President within six months and what policies he will pursue; so, having said that, Brazil has a lot of strong points in its economy. So, if they get their political act together and take some tough structural changes, I’m sure, it will be back within five years, I feel very confident that Brazil will be -- can be a strong economy again.

I’m sorry but I have to ask one last question, which is if that’s the case, then Brazil sounds like it’s on a very fine line between great candidate for divestiture versus great candidate for expansion. AES has available -- slide BNDES, yet still owns a large chunk of everything that AES has a footprint in except for Sul. And there’s been a lot of talk about privatizing the BNDES’ interests. Is that something that you want to pursue more aggressively, depending on the political situation or is this something that’s laid for a long time? Andrés Gluski: We can’t speak for BNDES and what they decide to do with their assets. We did have the separation of our assets in Brazil to give us greater operating control in Tietê and greater capital structuring flexibility in general. So, we’ve done that. And I would say that, if you look at what we’ve done Brazil, we’ve certainly de-risked our self significantly, because we sold half of our holdings in Eletropaulo in 2006. We spun off the telco from Eletropaulo; sold that for $1 dollars. So we feel that we’ll continue to manage Brazil sort of holistically and look at what are the fundamental exposures we have there.

And our last question today comes from Charles Fishman of Morningstar. Please go ahead.

Andrés, just to follow up that last question; you are probably most knowledgeable person about Brazil that I ever get a chance to ask a question to. In a quarter or two quarters ago, you talked about a turnaround in Brazil, maybe 2018. And now, in response to the last question, I heard you say like more like five years. Has something happened in the last three months that makes you a little more pessimistic? Andrés Gluski: No, let me clarify that. I do think the turnaround in two years is still I would say possible, may be sort of 50-50 chance. What I think within five-years, I feel very optimistic at some point, I don’t know if it’s three years, two years, they will come back. I think depending on the political resolution of that the crisis they are facing now, I wouldn’t even be surprised that you have a sort of, I don’t know, call it euphoria but a pickup in sentiment in Brazil with the resolution. I mean we’ve seen that when you have certain political developments, they actually appreciate in the market. So, what I think is important to realize is that the crisis in Brazil has a lot to do with certain policies and not just the drop in commodity prices. So that makes the comeback more within their capabilities of doing.

Okay. We thank everybody for joining us in 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.

And ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.