AES Earnings Call Nuggets: Cameroon SONEL and Overhead Cost Reduction Targets
Jon Cohen – ISI Group Inc.: Couple of things. First of all, there’s been some reports in the press that you’re looking to exit your stake in Cameroon SONEL, and sure you don’t want to talk too much about it. But can you give us a sense of just some of the high level financial metrics there; maybe like book value and contribution to PTC?
Andres Gluski – President and CEO: Yeah, of course, I can comment, and I haven’t (on) none of our possible asset sales. We sort of laid out how we look at businesses and how we sell them. I would say that the – that is within the EMEA region, and it’s a relatively modest contributor to earnings and a very small contributor to parent operating cash flow or dividends back to Corp.
Jon Cohen – ISI Group Inc.: Then my other question, so it looks like you’re at $500 million for proportional free cash flow for the year, which is almost half of the top end of your range, and you said that most of your earnings and cash flow from ops are going to be back-end-loaded. So, can we infer from that that you’ll do – you could do better than the top end of the range for your proportional free cash flow and what would that mean to the parent free cash flow.
Andres Gluski – President and CEO: Yeah, I would say – yeah, the parent free cash flow – I mean, no, we’re not going to – as we’re saying, we’re staying within our guidance at this point, but as Tom indicated, we were doing better on the cash metric…
Thomas O’Flynn – EVP and CFO: Yeah, I think Jon, (as I said) is the proportional – I think I’d say the proportional free cash flow we just stay with the ranges we have. I think the parent free cash flow perhaps we’ll be more conservative with that range going out at the start of the year. So we’re now focused towards the top end of that range. And as we consider dividend policy later in the year, that’s an important baseline.
Jon Cohen – ISI Group Inc.: Lastly, can you just give us a sense of what the long-term effective tax rate is? So, looks like this year your earnings are going to benefit about $0.11 versus last year from tax. Is that something that should reverse over time or can we assume that your tax rate is going to stay close to where it was?
Andres Gluski – President and CEO: Yeah, what we have in our long-term projections is low 30s. And so, yes, this year is particular. This is very much effective from where the earnings come. So the earnings, for example, Brazil is having lower earnings; that is a high tax jurisdiction. If you have more earnings, for example, coming from Chile, that’s a low tax jurisdiction.
Thomas O’Flynn – EVP and CFO: Yeah, so I think, Jon, you’re right. I think as we look at the sort of a run rate cutting through the differences, if next year is a normalized year on this similar path of earnings, we’d be about $0.10 to $0.12 higher in taxes.
Overhead Cost Reduction Targets
Ali Agha – SunTrust Robinson Humphrey: Andres, listening to your comments particularly on the cost reduction front, the fact that you will be running ahead of plan this year, how should we think about the fact that that $145 million target through ’14 could end up being conservative? I mean, what’s your confidence level that could go up? And related to that, in the past you’ve talked about the fact that even though you are officially looking at 4% to 6% EPS growth, your aspiration would be to get it back up to 6% to 8%. What’s your confidence level on doing that and when could we start to see signs of that happening?
Andres Gluski – President and CEO: Taking the first part of the question, how do we feel about our overhead cost reduction targets; and first, I want to say this is our overhead cost reduction targets. We’re doing a lot of other things in the businesses. So first, yes, we feel confident that we will exceed the $145 million. We’ll give you more exact indication how far we think that will go when we update our guidance for next year in the fourth quarter after we’ve finished our budget. Regarding the second question, as we said, we’ll work very hard to exceed the sort of total return we set out of 6% to 8%, but we’re facing significant headwinds. The dry hydrology this year is in many cases the worst the country has experienced in 70 years, and what’s been very unusual is that the North of Latin America and the South of Latin America were correlated, which is usually, they are not correlated; they go in opposite direction, as well as FX and commodities, but we remain committed to try to exceed this goal.
Ali Agha – SunTrust Robinson Humphrey: Second question, I know you guys had looked at this, potentially IPO-ing your solar assets in Toronto, a pullback on that. Since then, there’s been excitement about this so-called yield-go structure. Other companies have tried it, and that seems to have been accepted well by investors. What would be your appetite for a structure like that? What’s your thinking on your portfolio in a yield curve type format?
Andres Gluski – President and CEO: Well, we think again the – the process that we’re in now of bringing in partners on our projects and our businesses – especially financial partners – we’re allowed to operate and really extract the synergies and economies of scale. It is the way to go. Now regarding the solar, we did look at a yield based – sort of a yield curve on solar. We still have a Mount Signal in construction which is 260 megawatts of solar in Imperial Valley in California. And so really, it was not completed. We weren’t happy with the price and wait until there’s less sort of construction risk and revisit this. So, what I can say that we’re looking at all possible ways of getting the most value out of our footprint and out of our assets, because that’s really what we think is all about. This is a capital-intensive business and what we want to do is at each – and we have an unmatched footprint, we have very good brand names, we have very good contracts, very good assets, it’s really how can we maximize the returns from net invested capital. I don’t know Tom, if you want to add something…
Thomas O’Flynn – EVP and CFO: No, I think you said it well Andres. We do look at ways that we can track capital at more attractive levels. We certainly do have the project level partnerships that Andres touched on. We did look at the solar situation in the north and I thought it was good concept, which is worth – we’re comfortable with the value; it may look better in the future once Mount Signal gets on line. But…
Ali Agha – SunTrust Robinson Humphrey: Last question. Just to be clear on the asset sale goals you’ve talked about, so you’ve done about $234 million year-to-date. Did I hear you right that you still expect to do $500 million by the end of this year? And then the $900 million number you talked about; is that incremental to the $500 million or does that incorporate the remaining portion of that $500 million?
Andres Gluski – President and CEO: So, certainly two parts to the question. First, yes, we remain optimistic that we can reach the $500 million in net proceeds to AES this year, and when you talk about the $900 million – when I talk about the $900 million, that’s up and above the $230 million that was already been closed this year.
Ali Agha – SunTrust Robinson Humphrey: So the starting point is after what’s been done so far this year?
Andres Gluski – President and CEO: That’s correct. And if you remember, when we first started to talk, we always said there was a universe of around $2 billion, and what we’re saying at this stage is that we feel confident that we can reach that from now to the next two years, complete this, and hit the $2 billion figure.
A Closer Look: AES Earnings Cheat Sheet>>