愛依斯電力 (AES) 2015 Q1 法說會逐字稿

Good morning. My name is Angel, and I will be your conference operator today. At this time, I would like to welcome everyone to the AES Corporation first-quarter 2015 financial review conference call.

(Operator Instructions)

Thank you. Ahmed Pasha, Vice President of Investor Relations, you may begin your conference.

Thank you, Angel. Good morning, and welcome to AES's first-quarter 2015 earnings call.

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. There are many factors that may cause financial results to differ materially from these statements. Please refer to our SEC filings for our 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?

Good morning everyone, and thank you for joining our first-quarter 2015 earnings call.

I'm pleased to report that with our first quarter results, we are reaffirming our 2016 guidance for all metrics. Since our previous quarterly call less than three months ago, we have achieved several significant milestones on our strategic objectives and our priorities for 2015. We continued to leverage our platforms. Our $9 billion construction program is advancing on schedule, and will be the major contributor to our cash and earnings growth over the next four years.

This quarter, we commissioned the largest power plant that AES has ever constructed. We also signed agreements for two additional asset sales, totaling $105 million in equity proceeds, and invested $345 million to prepay and refinance debt. This year, we have also repurchased $42 million of our shares. And we made substantial progress in addressing short-term issues affecting our businesses in Bulgaria and India. I will discuss some of these achievements in detail. But first, I'd like to provide the highlights of our financial results.

In the first quarter, we generated proportional free cash flow of $265 million, double our results of a year ago, due to the recovery of working capital at a couple of significant businesses. We earned $0.25 of adjusted earnings-per-share, which was a $0.01 increase from our first quarter of 2014. We improved operating performance at our US and Andes strategic business units, although we continued to experience headwinds from poor hydrology in Brazil and unfavorable foreign exchange in Latin America and Europe. During the quarter, our earnings benefited from our previous capital allocation decisions to pay down debt and buyback our shares.

As we have discussed in the past, we have taken steps to mitigate the impact of adverse hydrology in Latin America. And this year, that risk is mostly limited to Brazil. We also have a rolling 12-month hedging strategy to help mitigate the impact of fluctuations in foreign currencies, especially the Brazilian real, the Colombian peso and the euro. Although these currencies have weakened against the US dollar, energy demand has remained robust, at 3% to 10% in our markets, except in the US, where we are experiencing flat demand, and in Brazil, where demand growth is slightly negative.

Now, I'll discuss our significant accomplishments since our last call, starting with our progress in resolving a couple of business-specific issues, beginning on slide 4. In Bulgaria, with the Maritza plants' sole customer, the National Electricity Company, or NEK, had fallen significantly behind on its payments. We're now seeing positive momentum. Last month, Maritza signed an MOU with NEK to receive full payment of all arrears, which as of March 30 were $236 million, in exchange for a decrease in the capacity price of a long-term PPA. We expect to sign a binding agreement by the third quarter of this year.

The 14% capacity price reduction is already reflected in our 2015 guidance, as well as our longer-term expectations. This agreement is part of a broad set of initiatives the government of Bulgaria is taking to help restore NEK's financial positions. One of these initiatives is the introduction of energy sector reforms, to reduce the volume of energy that NEK purchases from cogenerators and compensating NEK through existing environmental taxes. Already, Maritza's collections during the first four months of the year have improved by 40%, and our receivables balance has remained flat as of the end of December.

Turning now to our 1,320 megawatt OPGC 2 project under construction in India, on slide 5, as you may know, late last year, the Supreme Court of India overturned the allocation of 214 coal plants, including those for OPGC 2. I'm pleased to report that the project, through a new joint venture between OPGC and the government of Odisha has re-secured the rights to the same coal blocks, which can support 2,640 megawatts of new capacity. Construction on OPGC 2 is on schedule, with the plant expected to come online in 2018. Now turning to slide 6, I'll discuss our construction program and development pipeline in more detail.

Our construction program is the most significant driver of our 10% to 15% average annual growth in free cash flow, over the next few years. This strong growth is the foundation for our commitment to 10% annual dividend growth, as well as other capital allocation decisions.

From 2015 through 2018, we expect to commission 7,131 megawatts of new capacity, which is a high multiple of the roughly 600 megawatts we brought online in the three previous years, from 2012 through 2014. In fact, already this year, we have brought online 1,312 megawatts, which is 87% of the capacity we expect to commission this year.

Moving on to slide 7, a remaining 5,118 megawatts under construction are progressing well, and remain on time and on budget. As a reminder, the total CapEx for our projects currently under construction is $7 billion, but AES's equity commitment is only $1.3 billion, of which all but $400 million has already been funded. As you can see, roughly 80% of this new capacity is in the Americas. We expect a return on equity from these projects of more than 15%.

Turning to slide 8, I'm very happy to report that we have achieved commercial operation on our 1,240 megawatt Mong Duong project in Vietnam, six months early. Additionally, the project reached 18 million man-hours without a lost time incident. This project provides us with a solid platform from which to grow our presence in Vietnam, where we see a number of future platform expansion opportunities.

Moving to slide 9, to help mitigate our hydrology risk in Panama, we recently inaugurated a 72-megawatt thermal power barge. The plant's output is contracted under a five-year PPA. Were also looking at similar opportunities in other countries in Latin America, to decrease our exposure to fluctuations in hydrology.

Finally, looking at our growth opportunities beyond the projects currently under construction, beginning on slide 10, we see compelling platform expansion opportunities in a number of growing markets, such as Chile, Mexico, Panama and the Philippines.

In more mature markets, like California and the United Kingdom, we see opportunities to replace older, less efficient or non-compliant capacity. Generally, we expect our future project mix to be heavily weighted towards natural gas, renewables and energy storage, as we seek to match the right offering with the future needs of each market. As we've said in the past, we will continue to compete all investments in growth projects against share repurchases, in order to ensure that we are maximizing risk-adjusted per-share returns for our shareholders.

Based on the opportunities that we see across our portfolio, beyond 2018, we believe we can invest $300 million to $400 million of AES equity in attractive growth projects each year, which is consistent with the amount of equity we are currently contributing annually to our growth projects. This level of annual equity commitment is quite moderate, considering the expected growth in our free cash flow and continued recycling of capital from additional asset sales. We also plan to bring in financial partners on all of our larger projects, as a means of improving our returns, fine-tuning our portfolio's risk exposures and having our projects vetted by other investors.

Now, I'd like to highlight a couple of more significant projects in our development pipeline, beginning on slide 11. Our Southland re-powering project in California, with 1,400 megawatts of gas-fired and energy storage capacity, is on track to begin construction in 2017. We expect to select our EPC contractor, and file final permitting amendments in the next six months.

Our development pipeline is not limited to power generation projects, as we seek to realize the full value of our existing market platforms, through adjacent business lines, such as enhanced LNG services, desalinization and energy storage. Turning to slide 12, for example, in the Dominican Republic, we're working on opportunities to expand our existing LNG infrastructure. We are developing a second gas pipeline, which would transport natural gas from our re-gasification terminal to other power generators so they can convert up to 1,000 megawatts of diesel and oil-fired generation to cheaper, cleaner natural gas.

We are also advancing in the development of an upgrade of our LNG import terminal to allow for reshipment of LNG. The ability to reship LNG will be an extension of our successful gas distribution business in the Dominican Republic, which supplies third party trucks with liquefied natural gas. Both of these attractive projects will require only modest equity investments, and so we expect to largely fund them with leveraged capacity at the local business.

In terms of desalinization, on slide 13, we currently have one 200 cubic meter per hour project under construction at our Angamos power plant in Chile. Although this project is largely a modernization of our existing desal facilities at that plant, there are a number of potential desal projects in Chile to supply our mining and industrial customers. We see desal as a timely and significant opportunity in Chile, and possibly, longer-term, in Mexico and California, given the challenges of water supply in those markets, and our many years of experience operating desal plants.

Moving on to slide 14, we are the world leaders in battery-based energy storage, with 86 megawatts of installed capacity. Although it is likely to remain relatively small in the near-term, we see the potential for a much larger opportunity over the next four or five years. We are encouraged by ongoing regulatory support and growing acceptance by power systems and utilities in some of AES's markets.

To that end, as you may have seen, we recently announced that we have 50 megawatts under construction, including the first energy storage units in the Netherlands and Northern Ireland. These projects under construction are all additions to our existing platforms. We are well-positioned to take advantage of this emerging business opportunity, given AES's international portfolio, and eight years of successful and profitable experience operating battery-based energy storage.

With that, I'll turn the call over to Tom, to discuss our first-quarter results and full-year guidance in more detail.

Thanks, Andres, and good morning everyone.

This quarter, we continued to benefit from our capital allocation decisions and operational improvements, despite some macro headwinds. Further, as anticipated, our cash flow improved as a result of lower working capital requirements. We also made substantial progress toward a key financial goal of improving our credit profile by reducing parent debt, lowering interest expense and extending maturities.

Today, I'll review our first-quarter results, including adjusted EPS, adjusted pretax contribution, or PTC, by strategic business units, or SBU. And for the first time, proportional free cash flow by SBU, which we have also included in our 10-Q. Then, I'll cover our 2015 capital allocation plan and our 2015 guidance.

Turning to slide 16, first-quarter adjusted EPS of $0.25 was a penny higher than first quarter 2014. At a high level, we benefited from the following: $0.03 from capital allocation, which resulted in 13% lower parent debt, and a 3% lower share count relative to last year, and a $0.01 net increase from the performance of our businesses, with improvements in the US and the Andes, partially offset by lower contributions from Brazil, Europe, and Mexico, Central America and the Caribbean, or MCAC. On the negative side, we were affected by a $0.02 impact from a stronger US dollar, which appreciated 18% against the Brazilian real, Colombian peso and euro and a $0.01 impact from a slightly higher tax rate of 33% this year, versus 30% in the first quarter of last year.

Now, I'll cover our SBU's financial performance in more detail, on the next six slides, beginning on slide 17. In the US, adjusted PTC increased by $31 million, driven by better availability at DPL, compared to first quarter last year, when a couple of DPL generation plants were not available during the polar vortex. Proportional free cash flow increased $74 million, reflecting the lower working capital requirements this year, compared to during the extreme cold of last year.

In Andes, PTC increased $38 million, primarily due to better availability at our plants in Chile. However, proportional free cash flow declined by $6 million, due to the timing of collections and higher maintenance capital expenditures. In Brazil, PTC decreased $48 million, driven by FX and operating performance.

But half the decline is driven by our generation business at Tiete. You may recall that last year, Tiete benefited from spot sales at favorable prices, due to lower contract levels during the first half of the year. This benefit was more of a timing issue, as Tiete had to purchase in the spot market in the second half. This year, Tiete's contract levels are flat in the first and second half, so we expect contributions to be evenly distributed.

Additionally, Sul, one of our utilities, had lower results, due to lower sales volume and higher fixed costs. Proportional free cash flow increased $15 million, primarily driven by higher collections of pass-through energy purchases, billed during 2014, offset by lower operating performance. In MCAC, PTC declined $15 million, largely driven by lower margins in the Dominican Republic, where revenues are partially indexed to oil prices, as well as lower availability. This impact was partially offset by improved hydrology in Panama.

Proportional free cash flow improved by $55 million, primarily driven by improved working capital in El Salvador and Puerto Rico. In Europe, adjusted PTC decreased by $30 million, half of which is due to lower contributions from the sales of Ebute in Nigeria, and our UK wind businesses, and the remaining half is largely from unfavorable foreign currency impacts. Proportional free cash flow increased by $21 million, driven by higher collections at Maritza, which were 60% higher than the first quarter of 2014.

And finally, in Asia, PTC was essentially flat, after taking into account the impact from the sale of 41% of Masinloc in the third quarter of last year, offset by the one-time charge recorded at Masinloc in the first quarter of 2014, related to the market spot price adjustment. Proportional free cash flow decreased $37 million, due to the Masinloc sale and the higher working capital requirements.

Turning to slide 23, in summary, overall, we earned $252 million in adjusted PTC during the quarter, an increase of $9 million from last year, and we generated $265 million of proportional free cash flow, representing a doubling from $129 million in last year's first quarter. As you may recall, working capital was a drag on our results last year, and as reflected in our first-quarter results, we're seeing recovery.

Now to slide 24, and our parent capital allocation plan for the year, regarding sources on the left-hand side, the only update from our last call is an increase of $100 million in equity proceeds from asset sales, from the sale of the Armenia Mountain wind project in Pennsylvania, and the sale of 40% of our interest in the IPP4 plant in Jordan. This brings our total available discretionary cash for 2015 to roughly $1.6 billion. We continue to expect parent cash flow of $525 million this year, with 10% to 15% average annual growth through 2018.

Turning to the uses on the right-hand side of the slide, in addition to the dividend, we also plan to invest about $350 million in our subsidiaries, 60% of which is an IPL, and has already been funded. We've invested $345 million in prepayment and refinancing of parent debt, to balance asset sales and planned share buybacks.

And finally, we repurchased $42 million of shares year to date, and expect to invest at least $324 million this year, which assumes that we use $300 million of the $400 million we purchased authorized in February. This leaves $200 million of discretionary cash to be allocated this year.

Turning to our parent debt profile, on slide 25, since our last call, we prepaid $315 million of parent debt, bringing our total parent debt reduction, since the end of 2011, to $1.5 billion, or a 25% reduction. In early April, we also refinanced another $500 million in near-term parent debt maturities.

These transactions resulted in a reduction in our near-term maturities to only $180 million over the next four years, and reduced the average interest rate from 6.3% to 5.6%. We also continue to optimize the capital structure of certain subsidiaries and affiliates, such as Guacolda in Chile, where $830 million in long-term debt was refinanced in April, at about 4.5%, demonstrating the strong credit quality and market access of our businesses.

Now beginning on slide 26, I'll discuss our adjusted EPS guidance for this year, which is based on the following assumptions: currency forward curves, as of March 31, which reflect roughly 10% depreciation versus the US dollar, compared to year-end curves for the Brazilian real, Colombian peso and the euro; commodity forward curves as of March 31, which reflect roughly a 5% to 10% decline for oil and gas; and the current outlook for hydro in Latin America, which is in line with our expectations, except in Brazil, the rainy season there is drawing to a close, and reservoir levels are currently at about 35%, and are expected to be about 37% at the end of May.

We believe that the government is unlikely to call for rationing this year, given these levels. That said, the system continues to face a hydro generation shortfall, which has a financial impact on Tiete. We previously had built a $0.05 impact into our guidance, based on having to cover 15% to 17% of our contract in the spot market. We now expect the shortfall to be 17% to 19%, due to continued high thermal dispatch. We expect this will add another $0.02 to the hydro impact this year. We've also incorporated a modest decline in demand at Sul in Brazil, resulting in an incremental impact of another penny.

Now turning to slide 27, as we discussed on our last call, our adjusted EPS guidance is $1.25 to $1.35 per share, which when we provided it in late February, was based on currency and commodity curves as of December 31. The impact of updating these curves, based on the sensitivities we've disclosed, is $0.05. However, we have been proactive in hedging our downside, which reduced the FX and commodity impact by $0.03. Further, as I just discussed, we're incorporating an additional $0.03 impact from poor hydrology and demand in Brazil.

We've also included a $0.01 benefit from the completion of the Vietnam project, slightly ahead of our internal projection. Bottom line is that, although we are facing some headwinds, we're managing the impacts, and therefore reaffirming our EPS guidance range.

At the same time, as you can see on slide 27, we remain confident in our portfolio's ability to generate strong cash flow. We are reaffirming our proportional free cash flow guidance of $1 billion to $1.35 billion, which, after subsidiary debt pay-down, provides us with about $525 million in parent free cash flow. We will continue to create value by investing in this strong and growing cash flow, to maximize returns to shareholders.

With that, I'll now pass it back to Andres.

Thanks, Tom.

To summarize, we are encouraged by the continued successful execution of our strategy, and with the resilience of our platform, and the opportunities that it provides to increase shareholder value. As we laid out on our last call, for 2015, our priorities are to pull all levers to achieve our financial objectives, despite headwinds from poor hydrology in Brazil and lower foreign exchange and commodity prices; complete the 1,240 megawatt Mong Duong project in Vietnam, which will be a major contributor to our growth: we have already brought this plant online six months ahead of schedule.

Resolve Maritza's outstanding receivables issue: we have signed an MOU with NEK, and expect to execute a binding agreement by the third quarter; continue to execute on our platform expansion opportunities, and bring in financial partners. We expect to have financial partners on all of our large projects. Reduce parent debt, and improve our credit profile, by prepaying and refinancing shorter-term maturities. And as always, allocate our discretionary capital in such a way as to maximize shareholder returns, by competing growth projects against share repurchases.

Now, I would like to open up the call for questions.

(Operator Instructions)

Julien Dumoulin-Smith, UBS.

Hi, good morning.

Good morning Julien.

So first quick question, more at a high level. In terms of future growth opportunities, you talk about $300 million to $400 million in equity investment potential. Where do you expect those dollars to trend towards? I suppose A, as you think about buybacks at (inaudible), would it be more in that direction? And then B, in the context of growth investment, obviously, you've heard a lot in the media around storage of late. As well as your own efforts in DG in the latest quarter. I'd be curious if you could talk to opportunities there, as well as Puerto Rico, in terms of where those respectively fit within the growth buckets?

Okay. Thanks, Julien. As I said, we expect to have allocated about $300 million to $400 million to future growth projects. Of course, this would be leveraged by bringing in financial partners. Now the exact amount will depend on the projected return of those projects, and the value we create by buying back our share. So they will be competing. This is just to give a range where we see those projects. We also said that, compared to what is currently under construction, we see a heavier weighting towards natural gas, renewables and energy storage.

Now our energy storage business, I think, is quite different from -- and quite unique, actually. That we have been at this for eight years, we make money at it, and we have been successful. And we have a product that integrates several different usage. So we have the complete package, plug-and-play. I think that's one of the reasons we were successful in the Southern California Edison bid last year. So we see this is a growing market. In the US, California is taking the lead, by requiring utilities to have 1,325 megawatts of energy storage by 2020. And we see this trend going across the country, and in different places.

So again, we are very well-positioned to take advantage of it, and we have been successful. We're also opening up new markets. And the latest ones, we're already in Chile, we're looking at Northern Ireland and Netherlands. So it's one, let's say, technology has three different uses. On the one hand, you can use it for capacity release, like we do in Chile, which allows you -- you don't have to hold back 5% of thermal generation because you have a battery. You can use it for ancillary services, as we use it in PJM with Tait. And you can also use it as a peaking facility, which will be the main use in California.

So there are different markets we see it developing. But we are a big Company, so to really be a needle mover, we see it a couple years out. What we really want to be here is not too far ahead of the curve, but we want to be somewhat ahead of the curve. And that is really our strategy here, and we think we're well-positioned. So just like in the past, when I talked about bringing in partners, and said this was an idea, we will see how this develops, before giving any sort of guidance about, say, larger numbers, three to five years out.

Okay, excellent. And then just running here more specifically at the quarter. I suppose, why not more repurchases? What about the timing here, just as you execute on the authorization this year? And then subsequently, in terms of the 2015 guidance, would it be fair to say the lower half just to be clear, in terms of, I think, there's a net $0.04 negative, if you add up all those items?

I'll take the second question first. I think it's a little early in the year to give a guidance within the guidance. We reaffirmed all of our metrics. And as you know, we guide on cash flow metrics, as well as earnings metric. So again, overall, we feel we had a good quarter. In terms of the amount of buybacks, we just did a major refinancing, and used $345 million for that. And so we are committed to use, as Tom said in his speech, around $300 million this year towards share repurchases, and we maintain that.

Great, thank you very much.

Thank you Julien.

Ali Agha, SunTrust.

Thank you, good morning.

Good morning, Ali.

Good morning. Andres, my first question relates to Brazil. For the last several years now, it's been a source of disappointment for you. And not only are we dealing with the hydro situation, but it looks like there is upheaval or -- regarding the political outlook, the economic outlook, at least under the current administration. So I'm just curious, what is your view on Brazil? Why is it still a core market for you? And wouldn't it be better for the AES platform, if you were either substantially reduced, or maybe even out of Brazil, given all these other growth opportunities you've been telling us about?

Okay, it's a good question. I'd say, first, I think we've been very good sellers and managers of our portfolio. If you look at the close to $3 billion that we've raised in our asset sales since 2011, and the places we got out of, and the prices we got out of. If you think of Brazil, I think, starting in 2006, we started to reduce our position in Eletropaulo. And we also spun off the telecom, and sold that, as well, I think right at the right timing of the market. So actually, if you take a longer-term perspective, I think our performance in Brazil over this period has been good.

Now, there is no question that it's been affected by economic and political factors, and -- but mostly hydrology, quite frankly. So thinking about our position in Brazil, we have 2,600 megawatts of hydro in Tiete. We also have about $500 million of leverage capacity which we have not used at Tiete. So it provides us with an opportunity. And yes, there are droughts, and they are cyclical. This year, we are entering into a mild -- it's actually been declared, already, a mild to medium El Nino, which means they're going back to more normal weather patterns, as we've have seen in the other countries. So that will pass.

Now politically, Brazil, I think it's shown, on the one hand, significant institutional strength, given the -- as everybody is aware, the issues around Petrobras and the tax authorities, and the independence of the judiciary. I think they've also named a very strong minister of economy in Joaquim Levy. And we've had -- been able, in some small meetings with him, and seen what his plans are, and we feel very encouraged by it. So I think everybody feels that 2015 will be a difficult year Brazil. The economy is in contraction.

Tom mentioned it in his comments, that we see traction, especially in Sul, in terms of demand. But having said that, I think that if they take the right measures, and move towards a primary surplus, Brazil is a country with tremendous opportunities. You can't come in and come out of large, massive capital-intensive projects like ours. So you have to have a footprint there. So I think we have reduced it appropriately, and we're well-positioned to look at opportunities going forward.

Okay. Secondly, the $200 million of cash that you have not yet allocated. Can you just give us a sense of, from a priority point of view, what would be the priority for that use of cash? And you talked about using up $300 million out of the $400 million of the authorization. But just curious, the incremental $200 million, where do you think that is going to be spent?

That will depend. We've laid out what our strategy is, and what our considerations are. And we have restated our commitment to buy back $300 million of shares. And so we will see where that reallocated. But we're going to follow our straight capital allocation procedures, which we have done to date. I really can't give you more color than that, Ali.

Last question. The two asset sales that you announced today. Can you just remind us, or let us know, what's roughly the annual net income that goes away as a result of those sales?

It's a modest amount Ali. The Armenia Mountain wind project was the second part of the wind that we did earlier, and that would have a relatively attractive PE, from our standpoint. And then the Jordan project was a partial sell-down. I think if you add them together, the PE is around [$13 million]. So -- what's that -- $7 million or $8 million, take the -- you flip that versus [100].

I got it. Thank you.

Thank you, Ali.

Stephen Byrd, Morgan Stanley.

Good morning.

Good morning.

I wanted to follow up, just on Julien's question on storage. You've been very active for a number of years in storage. As you think about ways that you can monetize that advantage, do you envision that would be more in the form of continuing to win RFPs? Or are there ways that others might want to utilize the expertise that you have developed, either through joint ventures or effectively selling the energy management capabilities you have developed?

Yes, thank you for the question. To date, we have basically put the energy storage units on our platform, and this has given us several advantages. First, that we knew the markets well. Then we also had an ongoing dialogue with the regulators. Because one of the big issues with energy storage is to get regulatory approval. Because we know the benefits that it has for stabilizing the grid, but it's a question of how you're going to get paid for --sometimes for those services, if there's not an active ancillary market.

So the first steps, we put it on Chile, we put it in DP&L. We've also -- looking at putting it on our California platforms, possibly in the future, IPL and other places. But there are two steps. One is really identifying the use of the energy -- of the batteries. And the second is getting the regulatory approval. So we see opening up markets where we are present, like the Netherlands, like Northern Ireland, and continue with that successful strategy. Now in terms of how to monetize that beyond our platforms -- and it really would be to -- there are situations where we could actually install the [advantium] project, as we call it, which includes our IP, includes the batteries, includes how to operate it.

On -- in the markets where we are present, we could put it on somebody else's platform. Essentially, for example, let's say we're selling energy to a utility, and they would like to rate bait these assets. We can do that, as well. So that's one way that we could grow more quickly than just, say, putting it in operating ourselves. And we're looking at that, we're talking to people. So again, we are very well-positioned. We just think that this is a market that has to develop. And one of the big challenges, again, is to get the appropriate regulatory approvals, and also have -- to demonstrate how it's used.

Once you put a unit into a market, and people see that it functions very well, then we expect to have an increase in demand. So that's how we see going about it. Now if we put it on a platform, where we have a partner, for example, say, in Chile or at IPL, that partner will participate in that asset that we are putting on. And we really are managing from a center of excellence here at Corp. But pushing out the implementations into the businesses. So again, this has worked very well. And we think that this is an idea whose time has come.

But we see that the US market is the most immediate one, but we see it as going -- it works particular well, for example, on smaller grids, islands. And we are located in a lot of islands and smaller grids, from the Philippines to Puerto Rico, Hawaii, Northern Ireland, Dominican Republic. There are a lot of places you can use it. Or places, for example, like Chile, which due to the nature of the grid look like islands. You have certain constraints. So for all those reasons, again, we are optimistic, we think we are on the leading edge. And we will continue to push this product forward in numerous markets.

That's very helpful color. I wanted to shift over to renewables growth. We're seeing, I guess, what I perceive as some fairly aggressive competitors in the marketplace with -- many with yield-cos. Could you just talk, at a high level, to the degree of competition you are seeing, either for -- just on an absolute return level? Or in terms of just business developments? Are you seeing a change at all, in terms of competition? Or do you feel that, given how long you have been in your core markets, you still see numerous advantages for AES, as you look at renewables growth?

Yes, I think you said it right. The big advantage we have is putting them on to our existing businesses, and understanding these markets. And I think that we've had -- we've seen situations, for example, at certain times, say, wind in Brazil, others, where prices were very expensive, competition was very aggressive. And I think we're very judicious about where to put our money in. Now, we've sold part of our joint venture, Silver Ridge, to people who have aggressive global plans for utility scale solar. And we did it, in part, because it's not on our strategy of using our platforms.

We are much more efficient, and if you take all-in costs, which at the end of the day, that's what matters, from development to operating these plants, even financing. And rather than doing one-by-one project financing, is really doing it under the umbrella of an existing business. So for example, in Chile, which is a very competitive market, and they've had about 1,000 megawatts of renewables that are coming on the grid, we're building out the 20 megawatt solar. We have permits up to 200. And we will due to the degree that we get PPAs.

And of course, the issues with solar are that you only have energy 8 to 10 hours a day. So having the backup of an existing facility gives us a lot more leeway, in terms of what we can put together. And also, technologically, we can combine this, as we do in Laurel Mountain, where we combined wind with energy storage. It makes a more attractive offering. So really, that is our strategy, is to put it together, not to compete just on low returns for these projects, in many of the markets.

And our strategy, to date, in terms of getting lower-cost capital, has really been the partnerships, and bringing on partners. And I think we've been quite effective in that, to date. We have over $2.5 billion that we have raised, which is quite a lot of money, if you consider it, in terms of increasing our ability to do larger projects, our ability to fine-tune what our exposure is. And so we will continue to use that in renewables, as well.

That's great. Thank you very much.

Thank you.

Greg Gordon, Evercore ISI.

Thanks, good morning.

Good morning, Greg.

Tom, the $0.01 of operating performance improvement you had in the quarter, you don't have a commensurate assumed increase or decrease in earnings, within the $1.25 to $1.35 guidance range associated with operating performance. Is that because it was quarter-specific? Or is it just too early in the year to know how much you're going to gain from that, as you annualize the things you did in the first quarter?

It's probably a little early, Greg. And obviously, there's a lot of moving parts. We call that a few, not all. I think the one thing that does jump out was DPL. It had improved performance. We didn't have the polar vortex, so that was one thing that jumped off.

Okay, great. And then, at what point during the year, if you start to see yourselves potentially to the midpoint or high end of guidance, or the midpoint or low end of guidance, do you pull the trigger on capital allocation on the $200 million that remains? Because obviously, the further in the year you go, under a scenario where you are getting behind, it's too late to pull that lever. And the flip side being, if you are doing fine, you want to try to -- probably want to hold that money back, and think more flexibly about it. So in the context of where you are, how you think things are trending, when do you think we get an update on that?

We'll certainly do it quarter to quarter. We tried to look ahead here, and that's why we felt very comfortable saying that we would do $300 million of the $400 million that we authorized a couple of months ago. That would bring our share repurchase up to three and -- [340], whatever it would be. So we'll do it quarter by quarter.

I'll also keep in mind that, to the extent that we see capital allocation opportunities, let's say, in early 2016, we may end up 2015 with a higher balance than just working capital would require. So we do look at this hard. We do compete all projects, all businesses, whether they be small storage, or whether they be larger, new-build, we compete everything against share repurchase. And we will continue to do that, and keep you posted.

Okay, thank you gentlemen.

Chris Turnure, JPMorgan.

Good morning, Andres and Tom. I wanted to get an update on California re-powering. You guys were obviously successful there, back in the fall, with both the gas units and the storage. But could you give us some color here, on the potential for future gas projects there? And storage, as well, to some degree, and timing and next milestones around those?

Yes. I would say that, of course, additional gas units would have to be based on RFPs and bids. Which, if they come, we still have the capacity to compete on those. But really have nothing to report there. In terms of energy storage, as I said, California has a goal of 1,325 megawatts. Our commitment to Southern California Edison is 100 megawatts, and so there's a lot of room there for more. So we really have to see. But it's 2020, so we will be very active in California, seeking to increase our footprint there. And to the measure that we get additional bids, of course, we will keep you informed. So I think that, in the short-term, certainly energy storage, I see significant possibilities for growth in California, over the next couple of years.

And then going back to the re-securing of coal in the -- that's for projects, so it's not going to be online for a while. Could you talk to how the re-contracted situation compares to the original deal that you had, in terms of your growth plans? And if this is going to materially negatively affect any future projects that you were contemplating there?

Not really. There was this scandal, let's say, in India, it was called Coalgate, where they looked at the coal allocations. We weren't involved in any way in it. But they canceled all 214 coal allocations to re-look at them. What we have done is, we are in a joint venture, at the Odisha Power Generation Company, which is OPGC. And OPGC has entered into a joint venture with the state government of Odisha. So it's really a JV of our JV. And so our holdings in this company would be about 25%. That would be the operator of the mine.

So that no, we don't see any issues at this time. It's the same two coal blocks; it's the same amount of 2,640 megawatts. So it would support OPGC 2, and could support -- and again, we are not -- there is nothing specific on it. But could support an OPGC 3. And so we see nothing negative, at this stage, from the reallocation of the coal. And the construction of the plant is proceeding according to plan. So again, we've -- the plan was proceeding, and as we straightened out the coal allocation issue. So we are back to where we were at the beginning. I would say the one difference is that it's this joint venture with the state government of Odisha.

Okay. And then regarding future expansion in India, the economics have not meaningfully changed for any projects, versus what you were thinking before, because of the re-contracting?

Nothing has changed, to date.

Okay, great. Thanks.

Thank you.

Gregg Orrill, Barclays.

Yes, good morning, thank you.

Good morning, Greg.

So you reaffirmed the multi-year earnings guidance. You had some impacts, in the quarter, around -- in 2015, around the sensitivities that you were able to offset, to some extent, with hedging. As you look forward into 2016 and beyond, do you feel like the things that you have to offset that are capital allocation and operations? Or maybe other things, other investments, to offset those -- the negative move from sensitivities -- so you feel like you're in the same place?

I would say, again, we have nothing really new to report at this time. And as you point out, sensitivities move. Certain FX, and some of the commodities, have actually improved since the closing date of March 30. In the last couple of weeks, there's been some strengthening of the currencies to help offset some of that.

What we would see as, as you say, operational improvements. Some of the projects -- shorter-term projects, some of the energy storage that we put online this year can come on by 2016. Also, if we do any additional fogging, which also increases megawatts at a very low cost. For us, things like the NNL Terminal, basically the ability to the re-export LNG from the Dominican Republic. That may be late 2016. So those are mainly the things that we see at present. And of course, capital allocation would be another tool that we have.

Okay. Thank you.

Thank you.

Charles Fishman, Morningstar.

Thank you. First, congratulations to your contractor at Mong Duong. That safety record is phenomenal. And second -- or the only question I had left was, on slide 24, I just want to confirm, on that -- the third bullet point, about the $214 million, from your minority partner, the telco, your Canadian partner, that's not an increase in their equity piece. That's just consistent timing, with respect to your original announcement of their equity contribution in that -- [in a telco], correct?

Yes, that's correct. And thank you for the -- mentioning the safety record at Mong Duong. We're very proud of that, and we do have a lot of visitors who come to see us, how we were able to accomplish that in Vietnam.

Yes. As somebody that started out in the construction business, I can tell you that safety record is really something. Thank you. That was the only question I have.

Okay. Thank you very much.

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

This concludes today's conference call. You may now disconnect.