Good morning, and welcome to the AES Corporation Q1 20 21 Financial Review Conference Call. All participants will be in listen only mode. After today's presentation, If you're listening to the webcast, please mute your computer speakers before asking your questions. Please note this event is being recorded. I'd now like to turn the conference over to Amit Pasha, Chief Treasurer and Vice President of Investor Relations.
Thank you and over to you.
Thank you, operator. Good morning and welcome to our Q1 2020 Our press release, presentation and related financial information are available on our website ataes.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, which are discussed in our most recent 10 ks and 10 Q filed with the SEC. Reconciliations between GAAP and non GAAP financial measures Joining me this morning are Andrey Skuski, our President and Chief Executive Officer This is Talu Komentha, our Chief Financial Officer and other senior members of our management team.
With that, I will turn the call over to Andres. Andres.
Good morning, everyone, and thank you for joining our Q1 financial review call. Our Q1 results put us on track To achieve our 2021 guidance and 7% to 9% average annual growth through 2025. Gustavo will provide more color on our financial results later in the call. As we spoke about on our Investor Day in early March, We see a great opportunity for growth given the momentous changes in our sector and we are very well positioned to capitalize on the shift To low carbon sources of energy, over the past 5 years, we have transformed our company to be a leader in renewables and we have invested in innovative technologies That will give us a competitive advantage for many years to come. Although it has been less than 2 months since our Investor Day, We had a number of significant achievements to announce, including a landmark deal with Google, which I will describe in more detail later A strategic collaboration to develop new battery technologies between Fluence and Northvolt, the leading European supplier of sustainable battery Systems and a significant increase in LNG sales in Central America and the Caribbean to support those economies in their transition Away from heavy fuels.
First, let me lay out our strategic priorities for 2021 and the substantial progress that we have made year to date towards achieving those objectives. Turning to Slide 4, our 5 key goals for the year are: 1, Sign contracts for 4 gigawatts of renewables 2, launch the 4 20 fourseven product for carbon free energy on an hourly basis 3, further unlock the value of our technology platforms 4, continue to improve our ESG positioning through the transformation of our portfolio and 5, monetize excess LNG capacity in Central America and Caribbean. Turning to Slide 5. Last year, we set and exceeded a goal of signing 2 to 3 gigawatts of PPAs for renewables and energy storage. This year, we are increasing that goal by 60% to a target of 4 gigawatts.
Today, I am pleased to report that year to date, We've already signed 1.1 gigawatts, including a landmark deal with Google. As you can see on Slide 6, We have a backlog of 6.9 gigawatts of renewables, consisting of projects already under construction or under signed power purchase agreements PPAs. This equates to 20% growth in our total installed capacity and a 60% increase in our renewables capacity. Turning to Slide 7. We continue to increase our pipeline of projects to support our growth and now have a global pipeline of more than 30 gigawatts of renewable projects, roughly half of which is in the United States.
With increasing demand from corporate customers In a much more favorable policy environment, we expect the need for renewables to grow dramatically, and we're taking steps to ensure a continued competitive advantage. Moving to Slide 8, our second key goal for this year is to launch the first 20 fourseven energy product That matches a customer's load with carbon free energy on an hourly basis. To that end, earlier this week, we announced a landmark First of its kind agreement to supply Google's Virginia based data centers with 20 fourseven carbon free energy Sourced from a portfolio of 500 Megawatts of Renewables. Under this innovative structure, AES will become the sole supplier of the data center's energy needs, ensuring that the energy supplied will meet carbon free targets When measured on an hourly basis for the next 10 years, the carbon free energy will come from an optimized portfolio of wind, solar, Hydro and Battery Storage Resources. This agreement sets a new standard in carbon free energy for commercial and industrial customers who signed 23 gigawatts of PPAs in 2020.
As we discussed at our Investor Day, the almost 300 companies That make up the RE100 will need more than 100 gigawatts of new renewables by 2,030. This transaction with Google demonstrates that a higher sustainability standard is possible, and we expect a substantial portion of customers To pursue 20 fourseven carbon free objectives. Based on our leadership position, we are well placed to serve this growing market. And in fact, we've already seen significant interest from a number of large clients. Turning to Slide 9.
Our 3rd key goal is to further unlock the value of our technology platforms. 1 of these platforms is Uplight, an energy efficiency Software company that works directly with utility and has access to more than 100,000,000 households and businesses in the U. S. Uplight is at the forefront of the shift to low carbon and digital solutions on the cloud. In March, we announced a capital raise with a consortium Led by Schneider Electric, valuing Uplight at $1,500,000,000 Now to Slide 10.
We're seeing increasing value in many of our other technology platforms as well. Fluence, our joint venture with Siemens, Remains a global leader in energy storage, which is a key component of the energy transition. This dynamic industry is expected to grow 40% annually and Fluence is well positioned to capitalize on this immense opportunity Through its distinctive competitive advantages, including its AI enabled bidding engine. Turning to Slide 11. As you may have seen, last month Fluent announced a multi year agreement with Northvolt, the leading European battery developer and manufacturer For assured supply and to co develop next generation battery technology, this is an example of Fluent's continued innovation, Which has been validated by their consistent rank as the number one utility scale energy storage technology company according to GuideHouse Insights.
Similarly, we see the rapid progress of our prefab solar solution, 5D, as you can see on slide 12. This technology doubled the energy density and cuts construction time by 2 thirds. We now have 5B projects in Australia, Panama and Chile. We will be including 5B technology in our bids in Puerto Rico, where its proven resilience Category 4 hurricane winds will provide greater energy security. Proving out the unique value proposition of 5B Could significantly speed up the adoption of solar in cyclone prone areas.
Lastly, we continue to work Towards the approval of the 1st large scale green hydrogen based ammonia plant in the Western Hemisphere in Chile. Moving to Slide 13, we have undergone one of the most dramatic transformations in our sector. Over the past 5 years, we have announced the retirement ore sale of 10.7 gigawatts of coal or 70% of our coal capacity, one of the largest reductions in our spectrum. We recognize that we have more work to do and have set a goal of reducing our generation from coal to less than 10% of total generation by 2025. Furthermore, we expect to achieve net zero emissions from electricity By 2,040, one of the most ambitious goals of any power company.
As we achieve these decarbonization targets And continuing our near term growth in renewables, we anticipate being included in additional ESG oriented indices. Finally, turning to Slide 14, we see natural gas as the transition fuel That can lower emissions and reduce overall energy costs as markets work towards a future with more renewable power. Last month, we reached an agreement to provide terminal services for an additional 34 terabtus of LNG throughput under a 20 year take or pay contract. This will bring our total contracted terminal capacity In Panama and the Dominican Republic to almost 80%. There are 45 terabitus of available capacity remaining, Which we expect to sign in the next couple of years.
Our LNG business is focused on providing environmentally responsible LNG or green LNG as soon as feasible, which ensures the lowest levels of emissions throughout the entire supply chain. Now I would like to turn the call over to Gustavo Gimenta, our CFO. Thank you, Andres, and good morning, everyone. As Andres mentioned,
we are off to a good start this year, having already achieved significant milestones towards the strategic and financial objectives That we discussed on our Investor Day. We are also encouraged by the continued economic recovery across our markets With key land demand in line with pre COVID levels. Turning to our financial results for the quarter. As you can see on Slide 16, Adjusted pretax contribution or PTC was $247,000,000 for the quarter, which was very much in line with our expectations And similar to last year's performance, I'll discuss the key drivers of our Q1 results and outlook for the year in the following slides. Turning to Slide 17.
Adjusted EPS for the quarter was $0.28 versus $0.29 last year. With adjusted PTC essentially flat, the $0.01 decrease in adjusted EPS was the result of a slightly higher effective tax rate this quarter. In the U. S. And Utilities Strategic Business Unit or SBU, PTC was down $27,000,000 Driven primarily by a lower contribution from our legacy units at Southland and higher spend in our Clean Energy business As we accelerate our development pipeline given the growing market opportunities.
These impacts were partially set by the benefit from the commencement of PPAs at the Southland Energy Combined Cycle Gas Turbines or CCGTs. At our South America SBU, PTC was down $31,000,000 mostly driven by lower contributions from AES Andes, formerly known as A. F. Heineir due to higher interest expense and lower equity earnings from the Guacoda plant in Chile. These impacts were partially offset by higher generation at the Chivor hydro plant in Colombia.
Lower PTC at our Mexico, Central America and the Caribbean or NCAC SBU primarily reflects outages at 2 facilities In Dominican Republic and Mexico, with both already back online since April. Results also reflect the expiration of the 72 Megawatt barge PPA in Panama. Finally, in Eurasia, higher PTC reflects improved operational performance and lower interest expense in our Bulgaria businesses. Now to Slide 22. With our Q1 results, we are on track Our expected 2021 quarterly earnings profile is consistent with the average of the last 5 years.
Our typical quarterly earnings is more back end weighted, with roughly 40% of the earnings occurring in the first half of the year and the remaining in the second half. Growth in the year to go will be primarily driven by contributions from new businesses, Including a full year of operations of the Southland repowering project, 2.3 gigawatt of projects in our backlog coming online during the next 9 months, Reduced interest expense, the benefit from cost savings and demand normalization to pre COVID levels. We are also reaffirming our expected 79% average annual growth target through 2025. Now turning to our credit profile on Slide 23. As discussed at our Investor Day, strong credit metrics remain one of our top priorities.
In the last 4 years, we attained 2 to 3 notches of upgrades from the 3 credit rating agencies, including investment grade ratings From FEEDCH and S&P. These actions validate the strength of our business model and our commitment to improving our credit metrics. We expect the positive momentum in these metrics to continue, enabling us to achieve BBB flat credit metrics by 2025. Now to our 2021 parent capital allocation plan on Slide 24. Consistent with the discussion at our Investor Day, Sources reflect approximately $2,000,000,000 of total discretionary cash, including $800,000,000 of parent free cash flow And $100,000,000 of proceeds from the sale of Itavo in the Dominican Republic, which just closed in April.
Sources also include the successful issuance of the $1,000,000,000 of equity units in March, eliminating the need for any additional equity raise To fund our current growth plan through 2025. Now to use it on the right hand side. We'll be returning $450,000,000 to shareholders this year. This consists of our common share dividend, including the 5% increase we announced in December and the coupon of the equity units. And we plan to invest approximately $1,400,000,000 to $1,500,000,000 in our subsidiaries as we capitalize on attractive growth opportunities.
Approximately 60% of the investments are in global renewals, Reflecting our success in renewables origination during 2020 and our expectations for 2021. About 25% of these investments are in our U. S. Utilities to fund rate base growth with a continued focus on grid and fleet modernization. In the Q1, we invested approximately $450,000,000 in renewables, which is roughly 1 third of our expected investment for the year.
In summary, 85% of our investments are going to the U. S. Utilities and global renewables, helping us to achieve our goal Increasing the proportion of earnings from the U. S. To more than half and from carbon free businesses to about 2 thirds by 2025.
The remaining 15% of our investments will go towards green LNG and other innovative opportunities that support and accelerate the energy transition. With that, I'll turn the call back over to Andres.
Thank you, Gustavo. Before we take your questions, let me summarize today's call. As I have noted, we have made great progress on our 2021 and long term strategic goals, And we are reaffirming our 2021 guidance and expectations through 2025. We see a tremendous opportunity for growth And further increasing our technological leadership as the industry transition unfolds. From advancing our renewables To unlocking the value of our new technology businesses, we have a competitive advantage that will continue to benefit our customers and investors.
With that, I would like to open up the call to your questions.
Thank you. We will now begin the question and answer session. To withdraw your question, please press star and 2. If you are listening to the webcast, please mute your computer speakers before asking your question. At this time, we will pause momentarily to assemble our roster.
The first question is from the line of Richard Sunderland from JPMorgan. Please go ahead.
Hi, good morning. Thanks for taking my questions. Good morning, Rich.
Just want
to start off hi, thank you. Just want to start off on the Northvolt agreement And what it could mean to Fluence and maybe the energy storage market more broadly? And kind of curious on the development front itself, is this More sort of iterative development work or further up the development curve?
Yes, that's a great question. Look, this is really a landmark agreement As we move to essentially have strategic relationships with battery manufacturers. So Northvolt is Building a new plant in Sweden and in Poland, and we will have one train of the plant in Poland producing batteries for us. So as this market expands and as you have a real growth in demand, this assures battery supply for one of our markets. So I would say Europe, Middle East, Africa.
And in addition, we will not only have supply of batteries And again, a dedicated train to us. But we will also be working with Northvolt to have The new developments in battery. So in terms as battery technology develops, as you have better chemistry, as we say fine tune our Cube stack design, we will have joint development of additional Improved batteries on multiple fronts. So this is, I think, a very interesting development of getting a little bit more involved, let's say, one step Prior to just being the integrator and providing the control softwares.
Got it. Thank you for the color. And then separately, thinking about this Google deal, what is the ability to replicate that with other C and I customers? I know you mentioned some interest already. And I guess curious alongside that, Some aspects around the agreement itself, whether this is about having the right assets in the right locations to Procure or about the energy kind of management angle as well?
Well, It's both in a sense. So let me take the second part first to explain a little bit what the product is. So the product really that the key point is that we're netting on an Hourly basis, a carbon free energy. So this is most contracts Prior to this, virtually all are really netting, it could be on a yearly basis, could be etcetera. So you have an purchases of renewables during certain hours, but you're actually using non renewables during other hours, obviously, when you don't have peak production Of the renewables.
This is actually saying, on an hourly basis, the energy that I'm getting is carbon free. So, you asked the right question. It's not just a question of having overbuilt solar or overbuilt wind. It's really how do you manage these Different sources of energy, not only to ensure that it's carbon free, but to minimize the cost. So when are you buying When are you using wind?
When are you using solar? And the real key to make this happen is adding Hydro, small hydros and adding of course battery storage. So it's really how do you optimize multiple uses of multiple sources of renewable energy to provide the lowest cost, guaranteed carbon free energy netted on an hourly basis. So behind this offer, there's a lot of math, a lot of algorithms, a lot of risk management. And we think That this is a deal that we with Google itself, we had a 1,000,000,000 sorry, 1 gigawatt agreement.
And this is the first 500, and we expect it to grow as demand in these data center grows. But of course, there are other corporate clients that are interested in this. And we've seen interest from them. So as people, I would say, up Their environmental goals from saying, well, we're going to be net 0 carbon emissions on a Global scale and really having an hourly netting, this is really the only product on the market. So of course, those companies That have the highest environmental standards are interested in this product.
So it's, we think, a very interesting development And one that we expect to replicate with multiple clients.
Great. Thank you for the time today.
Thank you. The next question comes from Durgesh Chopra from Evercore ISI. Please go ahead.
Hey, good morning team. Thanks for taking my question. Maybe just I wanted to start with the 2021 target. Analyst Day, you guys were targeting 3 to 4 gigawatts Of PPAs this year and now it sort of seems like it's 4. I just want to make sure I'm sort of understanding that correctly.
Is that just Because you had a strong start and now you're expecting 4 instead of 2 to 4 at the Analyst Day?
Yes. I mean, we did 3 in 2019 2020. We're seeing a strong start, Not only in signed PPAs, but the deals we have in progress. So we feel sufficiently confident to say that we expect to be at the upper end of our initial guidance range of 3 or 4. So we expect to be at 4 gigawatts of new renewable PPAs Signed in 2021.
That's perfect. Thank you for clarifying that, Andres. Maybe just can I get your thoughts on Andres, obviously, there's a lot of U? S. Sort of domestic players in the market.
You're seeing a lot of international competition. Maybe just any thoughts as you sort of compete for these PPAs, what's the competition like and sort of what's your key competitive advantage?
Well, look, we do see a lot of competition out there in the market. Our strategy has been to offer More value to our clients. So we don't want to just compete for commoditized busbar renewable PPAs. So we have several competitive advantages, of course, with our knowledge of energy storage. We have been really a leader in the new For energy storage, not only through Fluent in terms of the new design, but AI bidding enabled bidding engines and how do we combine them.
So the Google deal is a perfect example of how we brought together multiple Energy sources, renewable energy sources and provided a unique product to a very demanding client. So that's Our angle is really how we bring these things together, how we create more value for the client. And I think very importantly is that we co create with our clients. So this was a joint project with Google that reflects more than a year's work. It's just like what we did in Kauai, What was really sort of the first sort of 20 fourseven solar energy storage Product offering, we co developed it with the Kauai Island Utility Cooperative.
So that's our unique angle. Again, we see more deals like this Google deal and more ways of working with clients to provide more value in just not a commoditized Product. So, the other advantage we have is, look, we started working on our pipeline. So, we have a pipeline of 30 gigawatts globally. We have a pipeline of more than 15 gigawatts in the U.
S. And pipeline is not an equally defined term across all players. Well, we mean a pipeline. These are projects that we can execute on. So, we have a land bank.
We've been buying land. We've been buying land rights. We've been Getting interconnection rights, looking really at the overlay of like best solar irradiation, best Interconnections with the grid. And in addition, best win sites. So we feel very good.
I mean, Putting something together like we did for Google in Virginia, it's something that we can replicate in other markets where we have big presence, whether it be New York, whether it California, that we don't think other people can at present. So I think we're very well situated. And we also have some other angles that people don't have That are very new. One I would mention is 5b. 5b allows us to double the energy density.
So think about that if you need to locate 100 megawatts of energy, we can do it in space, other people can do it in 50. We can build it in a third of the time. Now, 5b, the Maverick product is still early in its stage of development. We still have to massify to drive down costs and prove it out. But it has unique characteristics, not only the ones I've mentioned, But in Australia, it has been tested in actual life situations by Category 4 hurricane winds.
And that's something that conventional solar cannot do. So we feel very optimistic of offering this suite of technologies And also a unique way of bringing them together and also a unique way of working with clients.
That's great. Thank you for that color, Andreas. Lots of exciting talk. I'll jump back in the queue. Thanks for the time.
Thank you.
Thank you. The next question is from the line of Stephen Byrd from Morgan Stanley. Please go ahead.
Hey, good morning.
Good morning, Steve.
I wanted to talk through supply chain Stresses, we regularly get questions just throughout the whole renewables value chain about shortages, cost increases, etcetera. And I respect that The Northvolt agreement is one example of many ways that you've ensured availability. But I guess broadly put Across solar, across the balance of system, across storage, etcetera, are you seeing any stresses on supply chain for you all, any impacts From that broadly?
That's a great question. And as you know, we've been, I think, Always very concerned about this. When we talked beginning of last year about COVID At the time, we said, look, we were concerned about supply and the possible effects of COVID on the supply chain even here in the States. So we've been on top of this. Right now, we're not seeing any real supply constraints, whether it be on batteries, Whether it be on solar panels, whether we see on wind turbines.
However, if you look at the growth plans That are reflected in, for example, the Biden's renewable Energy agenda. And you see what utilities are talking about, you're seeing a dramatic increase in demand. And we think that that could be a problem in the future. So, we're getting out ahead of this. And I think it's not only The physical supplies that we're talking about, but it could be things like land, for example.
How many megawatts readily available land is there to meet this great need. So right now, we're not seeing it, Steve, But we're on top of it. And that's where we're making the kind of strategic agreements like Northvolt. Expect more, I would say, Because that we think is a key element. I mean, we expect this market to grow very rapidly.
And we think you have to be thinking about that now At all angles, whether it be people, land, interconnections. I do see, and I think we've spoken about it in the past, Energy storage is playing a role in eliminating transmission constraints. So that's an exciting new area that needs to be developed And it really isn't tapped. So getting to your answer, we're not seeing it today. We're on top of it.
I do expect There to be a pinch at sometime in the future. When, I don't know. It could be 12 months, could be 18 months, but we're preparing for that possibility.
That's really helpful. And then maybe shifting gears to 5B. You've spoken about this You laid it out again today. And I was just curious your latest thoughts in terms of as you think about the growth of 5B, whether that this is going to be Is there a potential given just how beneficial this approach is that this is something that similar to other technologies you develop you can broadly monetize, broadly market and sell or is this something more for your own purposes over time? How broad could this be and is this another candidate be monetized over time?
Yes. I love the question. So, we've had, my counting, 4 unicorns, Small companies that get to more than $1,000,000,000 valuation. I think our secret sauce has been to buy small companies. I mean, some of them we bought for $20,000,000 $30,000,000 initial investments and now are worth more than $1,000,000,000 And what's the secret sauce?
The secret sauce really is 1, we give them a platform For massive expansion. 2, we work with them to create new applications. So we're not just a Client, it's like we are co developing and creating new uses for this technology. So we allow it to grow fast. We will allow it to grow new areas.
But equally important, we're able to keep the entrepreneurial spirit of these businesses. So in other words, Even though we're a big company, we make a real effort not to smother them and let them run as much as possible on their own. Now we made a philosophical decision years ago that just to use it on our own platform, while that gives us A temporary advantage limits the growth of this new technology. And quite frankly, a lot of this has to do with massifying To really drive down costs, energy storage is a lot cheaper today because we massified it. We're in 29 countries.
We have 5.6 gigawatts in 29 countries that we either built or we're providing Control systems, bidding platforms. So that's quite large and allows us to learn from that. So with 5 b, it's the same. We will have a certain time of exclusivity in certain markets. But no, this will be available to the broader market over time.
So what we're doing with 5B is again massifying it, proving, Putting it out. And then eventually, we will it will be available to other players as well. So, for example, today in Australia, other people are using 5B technology. And I see it very similar to our prior ventures, whether it be Fluence, whether it be Distributed energy that we have, whether it be up light that our philosophy is not Just to keep it to ourselves, just keep it to our own platform, but expand it more broadly. So it's interesting.
We make money I was thinking about it. We make money for our shareholders in Two ways. One is on our platforms, which we are shifting from fossil fuels To renewables, and there you can value us on cash flow, Earnings per share, etcetera. But at the same time, we're creating value in these new technological Technology companies. And those have a different valuation and a different value creation.
And that's why selling to 3rd parties is so important to maximize the value of them. Now, the fact is that having The link between AES and these startups is key because as I said, we mutually beneficial To create value, we help them grow. They help us to really be a leading edge technology provider. If we didn't have the knowledge of batteries that we have, we wouldn't have done the Google deal. So there are 2 ways that we're creating value here With these new companies.
Really helpful. Thanks so much.
Thank you.
Thank you. The next question is from the line of David Peters from Wolfe Research. Please go ahead.
Yes. Hey, good morning, guys.
Good morning, Dave.
I was just curious on the strategic alliance with Google. Are you guys still working on similar agreements And locations beyond Virginia, I guess I'm just wondering how far you expect kind of the scope of that particular alliance to reach?
What I would say is that what I can say is really that we had an initial agreement, which we had talked about. It was really the sort of RFP for 1 gigawatt. That has, I would say, developed, if you will, into the deal that we have announced. We expect to expand some of that energy provided over time as their needs grow. And again, we will we have this unique product that we will offer to them and other clients At this stage in time.
So that's all I really can say at this stage of the game.
Okay. And then maybe just on some of the other projects you have in the works. Has there been any updates on the hydrogen study in Chile or We're in Vietnam with the LNG and CCGT projects, I guess, since Investor Day.
Look, regarding first the green Hydrogen really green ammonia project in Chile. We continue to work with our partner on the feasibility study. So, work goes on. And as I said, we'll probably have news before the end of the year one way or the other. It's really a matter of can we get the costs down To be competitive with gray or blue Hydrogen products.
So I'm optimistic. We're working hard and stay tuned. Regarding Vietnam, it's the same thing. We continue to work towards a new LNG terminal, Which would be 450 or so tera BTUs. So more than double what we have between Panama and the Dominican Republic.
And there's an associated 2.2 gigawatts of combined cycle gas plants. So, nope, that progress continues on that. We're part of the government's plan. Realize that this facility will avoid the construction of many, many coal plants. And I also mentioned that Many, many coal plants.
And I also mentioned that we will be, as soon as feasible, Moving towards providing green hydrogen, which basically means that it's certified that it doesn't it has less than a certain amount of leakage From production to delivery. And we think that's very important to really reap the climate advantages of Natural gas versus, say, other heavy fossil fuels.
Great. Thank you for the time.
Thank you.
Thank you. The next question is from the line of Charles Fishman from Morningstar. Please go ahead.
Good morning. Andres, I wanted to follow-up on that Vietnam Question. Does the recent strength in crude oil prices Help you in the development of that project in Vietnam. I would think I appreciate there's some coal plants there, but isn't a lot of the Or at least if you'd be replacing residual fuel used for Power generation in that region and the strength of the crude oil price to help you in that respect?
Our LNG business is really tolling, for example, in Central America and the Caribbean. So we get a tolling fee. We're not taking direct commodity risk. Now of course, the bigger the spread between Henry Hub and world oil prices, especially WTI, the more totaling We'll do at the margins. A lot of these are take or pay agreements.
So what we've announced is take or pay. So We're not so directly affected. But all things being equal, a bigger spread between natural gas And oil is favorable. We'll do at the margin some more. In Vietnam, this is a project which is very Much needed because they had been relying on offshore gas and that's running out.
So this will it has an immediate demand unlike Say, Dominican Republic or Panama where we had to develop the demand. This is a situation where you have a pent up demand And you will be relieving a bottleneck because they just aren't those fields are basically exhausted. So you have to bring in gas to Feed the existing combined cycles. So I really don't see it as much as directly as Oil price, gas play, again, at the margin, you could have more industries convert or more transportation convert To compress natural gas or other forms, but not really. These are tolling agreements.
And in Vietnam, the demand is there. It doesn't have to be created. But again, as this expands, for example, the new combined cycles, yes, those will definitely be displacing coal plants.
Andres, as I recall, the Vietnam project doesn't enter into the 7% to 9% Through 2025. That's really a 2025 event and beyond, correct?
That's correct.
Okay. Thank you. That's all I have.
Thank you.
Thank you. Ladies and gentlemen, this concludes our question and answer session. I would now like to turn the conference back to Amit Pasha for closing comments. Please go ahead.
Thank you everybody for joining us on today's call. As always, the IR team will be available to answer any follow-up questions you may have. Thanks again and have a great day.
Thank you very much. Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.