Highlights
- Achieved $2.2 billion of Consolidated
Net Cash Provided by Operating Activities in the first nine months
of 2016, 89% of the midpoint of full year guidance
- Achieved $1.1 billion of Proportional
Free Cash Flow in the first nine months of 2016, 91% of the
midpoint of full year guidance
- Earned $0.64 of Adjusted Earnings Per
Share in the first nine months of 2016, 64% of the midpoint of full
year guidance
- Third quarter 2016 Diluted EPS of $0.26
and Adjusted EPS of $0.32
- Reaffirming 2016 guidance ranges and
2017-2018 expectations for all financial metrics
- Completed 552 MW of projects under
construction in October 2016, bringing year-to-date completion to
2,966 MW
- Completed the sale of AES Sul in Brazil
in October 2016 for approximately $440 million in proceeds to
AES
The AES Corporation (NYSE:AES) today reported financial results
for the three months ending September 30, 2016. Compared with last
year, these results reflect higher contributions from the US
Strategic Business Unit (SBU) as a result of completion of
construction projects at Indianapolis Power & Light in Indiana
and the Andes SBU as a result of completion of the 531 MW Cochrane
plant as well as lower cost of purchased power and fuel at Gener in
Chile. These were largely offset by a lower contribution from the
Brazil SBU due to the expiration of Tietê's contract at the end of
2015.
Consolidated Net Cash Provided by Operating Activities for the
third quarter of 2016 was $819 million, a decrease of $96 million
compared to the third quarter last year. The result includes stable
margins; the decline was driven by the settlement of overdue
receivables in the Dominican Republic in September 2015 that
benefited cash flow last year, partially offset by an improvement
this year in working capital at Eletropaulo in Brazil. Third
quarter 2016 Proportional Free Cash Flow (a non-GAAP financial
measure) decreased $221 million to $400 million compared to the
third quarter last year. This decrease reflects stable margins,
while the main driver of lower Proportional Free Cash Flow was
lower working capital due to the settlement of overdue receivables
in the Dominican Republic in September 2015.
Third quarter 2016 Diluted Earnings Per Share from Continuing
Operations (Diluted EPS) was $0.26, flat with the third quarter of
2015. Third quarter 2016 Diluted EPS reflects stable margins and
lower asset impairment expense compared to last year, largely
offset by $0.06 lower equity in earnings of affiliates from the
restructuring at Guacolda in Chile executed in the third quarter of
2015. Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP
financial measure) for the third quarter of 2016 decreased $0.06 to
$0.32, primarily due to the $0.06 lower equity in earnings of
affiliates from the restructuring at Guacolda.
"We continue to make good progress on our financial and
strategic objectives to maximize shareholder value," said Andrés
Gluski, AES President and Chief Executive Officer. "This year, with
the commissioning of our 532 MW Cochrane power plant in Chile, we
have completed almost 3 GW of projects, on time and on budget. We
have already achieved 90% of our full year cash flow guidance
through the end of September and, in addition, on the 31st of
October we closed the sale of AES Sul in Brazil for $440 million.
Our strong cash flow will allow us to continue to grow our
dividend, pay down recourse debt and invest in attractive platform
expansions."
"We are well positioned to achieve investment grade credit
metrics by 2020 while also delivering attractive risk-adjusted
returns to our shareholders," said Tom O'Flynn, AES Executive Vice
President and Chief Financial Officer. "We are confident we can
achieve attractive growth in proportional free cash flow through
2018. Beyond 2018, we are well positioned to continue to leverage
our platforms by integrating new, low carbon generation sources
into our existing portfolio under long-term contracts."
Table 1: Key Financial Results
Third Quarter
Year-to-DateSeptember
30,
Full
Year2016Guidance
$ in Millions, Except Per Share Amounts
2016 2015 2016
2015 Consolidated Net Cash
Provided by Operating Activities $ 819 $ 915 $ 2,182 $ 1,505
$2,000-$2,900 Proportional Free Cash Flow 1 $ 400 $ 621 $ 1,070 $
948 $1,000-$1,350 Diluted EPS from Continuing Operations $ 0.26 $
0.26 $ 0.31 $ 0.58 N/A Adjusted EPS 1 $ 0.32
$ 0.38 $ 0.64 $ 0.90
$0.95-$1.05 1 A non-GAAP financial
measure. See “Non-GAAP Financial Measures” for definitions and
reconciliations to the most comparable GAAP financial measures.
Table 2: Guidance &
Expectations
$ in Millions, Except Per Share Amounts
Reaffirming Full Year2016
Guidance
2017-2018 Expectations
Consolidated Net Cash Provided by
Operating Activities
$2,000-$2,900 N/A Proportional Free Cash Flow 1 $1,000-$1,350
No change; at least 10% averageannual
growth off 2016 base
Adjusted EPS 1,2 $0.95-$1.05
Maintaining 12%-16% averageannual growth
off 2016 base
1 A non-GAAP financial measure. See “Non-GAAP
Financial Measures” for definitions and reconciliations to the most
comparable GAAP financial measures. 2 In providing its full year
2016 Adjusted EPS guidance, the Company notes that there could be
differences between expected reported earnings and estimated
operating earnings for matters such as, but not limited to: (a)
unrealized losses related to derivative transactions, estimated to
have no impact on Adjusted EPS; (b) unrealized foreign currency
losses, estimated to be $12 million; (c) gains due to dispositions
and acquisitions of business interests, estimated to be $3 million;
(d) losses due to impairments, estimated to be $186 million,
related to DP&L and Buffalo Gap I & II; and (e) costs due
to the early retirement of debt, estimated to be $18 million. The
amounts set forth above are as of September 30, 2016. At this time,
management is not able to estimate the aggregate impact, if any, of
these items on reported earnings. Accordingly, the Company is not
able to provide a corresponding GAAP equivalent for its Adjusted
EPS guidance.
2016 Guidance and 2017-2018 Expectations
- The Company is reaffirming its 2016
Consolidated Net Cash Provided by Operating Activities guidance
range of $2,000-$2,900 million.
- The Company is reaffirming its 2016
Proportional Free Cash Flow guidance range of $1,000-$1,350
million.
- The Company is reaffirming its 2016
Parent Free Cash Flow expectation of $525-$625 million.
- The Company is reaffirming its 2016
Adjusted EPS guidance range of $0.95-$1.05.
- The Company's 2016 guidance is based on
foreign currency and commodity forward curves as of September 30,
2016.
- The Company is reaffirming its growth
rate expectations for 2017-2018 for both Proportional Free Cash
Flow and Adjusted EPS.
- The Company expects growth to be higher
in 2018 than in 2017, largely because the completion of projects
under construction is more weighted towards 2018.
- The Company's 2017-2018 expectations
are based on foreign currency and commodity forward curves as of
June 30, 2016.
Additional Highlights
- Year-to-Date 2016, the Company prepaid
$306 million in Parent debt, including prepayment in July 2016 of
$181 million of 8% unsecured notes due in 2017.
- Year-to-Date 2016, the Company has
successfully completed 2,966 MW of projects on time and on budget:
- In October, 2016, completed 532 MW
Cochrane coal-fired plant and 20 MW Cochrane Energy Storage Array
at Gener in Chile.
- The Company currently has 3,389 MW of
capacity currently under construction and expected to come on-line
through 2019.
- The Company continues to expect
completion of the 531 MW Alto Maipo hydro project at Gener in Chile
in 2019 and, as previously disclosed, incremental capital
expenditure of 10% to 20% of the original $2 billion budget. The
additional cost is expected to be funded through a combination of
non-recourse debt and sponsors' equity. Currently, the Company's
indirect equity interest in the project is 40%.
- Year-to-Date 2016, the Company has
announced or closed approximately $500 million in asset sale
proceeds to AES.
- In October 2016, the Company closed the
sale of its 100% equity interest in AES Sul, one of its utilities
in Brazil, for approximately $440 million in proceeds to AES, net
of estimated working capital adjustments and transaction costs. The
majority of the proceeds are subject to Brazil statutory notice
period requirements for distributions which are expected to be met
by the first quarter of 2017.
- In June 2016, the Company received the
remaining $40 million in proceeds from the sales of Sonel, Dibamba
and Kribi in Cameroon, which were announced in November 2013.
- In February 2016, the Company received
$21 million in proceeds from the sale of a 24% interest in IPP4,
one of its generation businesses in Jordan.
- In January 2016, the Company received
$9 million in proceeds from the sale of Kelanitissa, its generation
business in Sri Lanka, and exited the country.
- Year-to-Date 2016, the Company has
repurchased 9 million shares for $79 million, at an average price
of $9.07 per share. 2016 share repurchases were executed in the
first quarter..
Non-GAAP Financial Measures
See Non-GAAP Financial Measures for definitions of Proportional
Free Cash Flow, Adjusted Earnings Per Share, Adjusted Pre-Tax
Contribution, as well as reconciliations to the most comparable
GAAP financial measures.
Attachments
Consolidated Statements of Operations, Segment Information,
Consolidated Balance Sheets, Consolidated Statements of Cash Flows,
Non-GAAP Financial Measures, Parent Financial Information and 2016
Financial Guidance Elements.
Conference Call Information
AES will host a conference call on Friday, November 4, 2016 at
9:00 a.m. Eastern Daylight Time (EDT). Interested parties may
listen to the teleconference by dialing 1-888-317-6003 at least ten
minutes before the start of the call. International callers should
dial +1-412-317-6061. The Conference ID for this call is 1674466.
Internet access to the conference call and presentation materials
will be available on the AES website at www.aes.com by
selecting “Investors” and then “Presentations and Webcasts.”
A webcast replay, as well as a replay in downloadable MP3
format, will be accessible at www.aes.com beginning
shortly after the completion of the call.
About AES
The AES Corporation (NYSE:AES) is a Fortune 200 global power
company. We provide affordable, sustainable energy to 17 countries
through our diverse portfolio of distribution businesses as well as
thermal and renewable generation facilities. Our workforce of
21,000 people is committed to operational excellence and meeting
the world’s changing power needs. Our 2015 revenues were $15
billion and we own and manage $37 billion in total assets. To
learn more, please visit www.aes.com. Follow AES on Twitter
@TheAESCorp.
Safe Harbor Disclosure
This news release contains forward-looking statements within the
meaning of the Securities Act of 1933 and of the Securities
Exchange Act of 1934. Such forward-looking statements include, but
are not limited to, those related to future earnings, growth and
financial and operating performance. Forward-looking statements are
not intended to be a guarantee of future results, but instead
constitute AES’ current expectations based on reasonable
assumptions. Forecasted financial information is based on certain
material assumptions. These assumptions include, but are not
limited to, our accurate projections of future interest rates,
commodity price and foreign currency pricing, continued normal
levels of operating performance and electricity volume at our
distribution companies and operational performance at our
generation businesses consistent with historical levels, as well as
achievements of planned productivity improvements and incremental
growth investments at normalized investment levels and rates of
return consistent with prior experience.
Actual results could differ materially from those projected in
our forward-looking statements due to risks, uncertainties and
other factors. Important factors that could affect actual results
are discussed in AES’ filings with the Securities and Exchange
Commission (the “SEC”), including, but not limited to, the risks
discussed under Item 1A “Risk Factors” and Item 7:
Management’s Discussion & Analysis in AES’ 2015 Annual
Report on Form 10-K and in subsequent reports filed with the SEC.
Readers are encouraged to read AES’ filings to learn more about the
risk factors associated with AES’ business. AES undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
Any Stockholder who desires a copy of the Company’s 2015 Annual
Report on Form 10-K dated on or about February 23, 2016 with
the SEC may obtain a copy (excluding Exhibits) without charge by
addressing a request to the Office of the Corporate Secretary, The
AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203.
Exhibits also may be requested, but a charge equal to the
reproduction cost thereof will be made. A copy of the Form 10-K may
be obtained by visiting the Company’s website
at www.aes.com.
THE AES CORPORATIONCondensed
Consolidated Statements of Operations (Unaudited)
Three Months Ended September
30,
Nine Months Ended September 30, 2016
2015 2016 2015 (in millions, except per
share amounts) Revenue: Regulated $ 1,785 $ 1,691 $ 4,926 $
5,319 Non-Regulated 1,757 1,831 5,116 5,617
Total revenue 3,542 3,522 10,042 10,936
Cost of Sales: Regulated (1,623 ) (1,458 ) (4,521 ) (4,447 )
Non-Regulated (1,231 ) (1,399 ) (3,750 ) (4,348 ) Total cost of
sales (2,854 ) (2,857 ) (8,271 ) (8,795 ) Operating margin 688
665 1,771 2,141 General and
administrative expenses (40 ) (45 ) (135 ) (150 ) Interest expense
(354 ) (365 ) (1,086 ) (995 ) Interest income 110 126 365 321 Loss
on extinguishment of debt (16 ) (20 ) (12 ) (161 ) Other expense
(13 ) (18 ) (42 ) (47 ) Other income 18 12 43 42 Gain on disposal
and sale of businesses — 24 30 24 Asset impairment expense (79 )
(231 ) (473 ) (276 ) Foreign currency transaction gains (losses)
(20 ) 12 (16 ) 4
INCOME FROM CONTINUING OPERATIONS BEFORE
TAXES AND EQUITY IN EARNINGSOF AFFILIATES
294 160 445 903 Income tax expense (75 ) (43 ) (165 ) (266 ) Net
equity in earnings of affiliates 11 81 25 96
INCOME FROM CONTINUING OPERATIONS 230 198 305 733
(Loss) income from operations of
discontinued businesses, net of income tax benefit(expense) of $0,
$(1), $4 and $6, respectively
(1 ) 5 (7 ) (12 )
Net loss from disposal and impairments of
discontinued businesses, net of income tax benefitof $401 for the
nine months ended September 30, 2016
— — (382 ) — NET INCOME (LOSS) 229 203 (84 )
721 Less: Net income attributable to noncontrolling interests (57 )
(23 ) (105 ) (330 ) Less: Net loss attributable to redeemable
stocks of subsidiaries $ 3 $ — $ 8 $ —
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ 175
$ 180 $ (181 ) $ 391 AMOUNTS ATTRIBUTABLE TO THE AES
CORPORATION COMMON STOCKHOLDERS: Income from continuing operations,
net of tax $ 176 $ 175 $ 208 $ 403 (Loss) income from discontinued
operations, net of tax (1 ) 5 (389 ) (12 ) NET INCOME (LOSS)
ATTRIBUTABLE TO THE AES CORPORATION $ 175 $ 180 $
(181 ) $ 391 BASIC EARNINGS PER SHARE:
Income from continuing operations
attributable to The AES Corporation commonstockholders, net of
tax
$ 0.26 $ 0.26 $ 0.31 $ 0.58
Income (loss) from discontinued operations
attributable to The AES Corporation commonstockholders, net of
tax
— 0.01 (0.59 ) (0.01 )
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES
CORPORATION COMMONSTOCKHOLDERS
$ 0.26 $ 0.27 $ (0.28 ) $ 0.57 DILUTED
EARNINGS PER SHARE:
Income from continuing operations
attributable to The AES Corporation commonstockholders, net of
tax
$ 0.26 $ 0.26 $ 0.31 $ 0.58
Loss from discontinued operations
attributable to The AES Corporation common stockholders,net of
tax
— — (0.59 ) (0.02 )
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES
CORPORATION COMMONSTOCKHOLDERS
$ 0.26 $ 0.26 $ (0.28 ) $ 0.56 DILUTED SHARES
OUTSTANDING 662 682 662 694 DIVIDENDS
DECLARED PER COMMON SHARE $ 0.11 $ 0.10 $ 0.22
$ 0.20
THE AES
CORPORATION Strategic Business Unit (SBU) Information
(Unaudited) Three Months Ended
September 30, Nine Months Ended
September 30, (in millions) 2016 2015
2016 2015 REVENUE US $ 916 $ 923
$ 2,582 $ 2,751 Andes 667 652 1,864 1,894 Brazil 1,027 866 2,761
3,083 MCAC 547 597 1,596 1,796 Europe 207 292 675 921 Asia 179 195
574 501 Corporate, Other and Inter-SBU eliminations (1 ) (3 )
(10 ) (10 ) Total Revenue $ 3,542 $ 3,522
$ 10,042 $ 10,936
THE AES CORPORATIONCondensed
Consolidated Balance Sheets (Unaudited)
September 30, 2016
December 31, 2015
(in millions, except shareand
per share data)
ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,325 $
1,257 Restricted cash 291 295 Short-term investments 596 469
Accounts receivable, net of allowance for doubtful accounts of $113
and $87, respectively 2,081 2,302 Inventory 637 671 Prepaid
expenses 92 106 Other current assets 1,266 1,318 Current assets of
discontinued operations and held-for-sale businesses 1,006
424 Total current assets 7,294 6,842
NONCURRENT ASSETS Property, Plant and Equipment: Land 780 702
Electric generation, distribution assets and other 29,087 27,751
Accumulated depreciation (9,884 ) (9,327 ) Construction in progress
3,300 3,029 Property, plant and equipment, net 23,283
22,155
Other Assets:
Investments in and advances to affiliates 626 610 Debt service
reserves and other deposits 644 555 Goodwill 1,157 1,157 Other
intangible assets, net of accumulated amortization of $94 and $93,
respectively 227 207 Deferred income taxes 503 410 Service
concession assets, net of accumulated amortization of $93 and $34,
respectively 1,465 1,543 Other noncurrent assets 1,909 2,109
Noncurrent assets of discontinued operations and held-for-sale
businesses — 882 Total other assets 6,531
7,473 TOTAL ASSETS $ 37,108 $ 36,470
LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable
$ 1,426 $ 1,571 Accrued interest 368 236 Accrued and other
liabilities 2,026 2,286 Non-recourse debt, includes $247 and $258,
respectively, related to variable interest entities 1,091 2,172
Current liabilities of discontinued operations and held-for-sale
businesses 802 661 Total current liabilities 5,713
6,926 NONCURRENT LIABILITIES Recourse debt 4,944
4,966 Non-recourse debt, includes $1,494 and $1,531, respectively,
related to variable interest entities 14,796 12,943 Deferred income
taxes 1,042 1,090 Pension and other post-retirement liabilities
1,035 919 Other noncurrent liabilities 3,035 2,794 Noncurrent
liabilities of discontinued operations and held-for-sale businesses
— 123 Total noncurrent liabilities 24,852
22,835 Commitments and Contingencies (see Note 8) Redeemable
stock of subsidiaries 775 538 EQUITY THE AES CORPORATION
STOCKHOLDERS’ EQUITY
Common stock ($0.01 par value,
1,200,000,000 shares authorized; 816,061,123 issued and659,175,940
outstanding at September 30, 2016 and 815,846,621 issued and
666,808,790outstanding at December 31, 2015)
8 8 Additional paid-in capital 8,645 8,718 Retained earnings
(accumulated deficit) (114 ) 143 Accumulated other comprehensive
loss (3,753 ) (3,883 )
Treasury stock, at cost (156,885,183
shares at September 30, 2016 and 149,037,831 at December31,
2015)
(1,904 ) (1,837 ) Total AES Corporation stockholders’ equity 2,882
3,149 NONCONTROLLING INTERESTS 2,886 3,022 Total
equity 5,768 6,171 TOTAL LIABILITIES AND EQUITY $
37,108 $ 36,470
THE AES CORPORATIONCondensed
Consolidated Statements of Cash Flows(Unaudited)
Nine Months Ended September 30, 2016
2015 (in millions) OPERATING ACTIVITIES: Net income
(loss) $ (84 ) $ 721 Adjustments to net income: Depreciation and
amortization 877 880 Gain on sales and disposals of businesses (30
) (24 ) Impairment expenses 475 276 Deferred income taxes (475 ) (8
) Provisions for (reversals of) contingencies 28 (91 ) Loss on
extinguishment of debt 12 165 Loss on sales of assets 26 23
Impairments of discontinued operations and held-for-sale businesses
783 — Other 106 50
Changes in operating assets and
liabilities
(Increase) decrease in accounts receivable 335 (314 ) (Increase)
decrease in inventory 36 (11 ) (Increase) decrease in prepaid
expenses and other current assets 670 377 (Increase) decrease in
other assets (237 ) (1,103 ) Increase (decrease) in accounts
payable and other current liabilities (567 ) 238 Increase
(decrease) in income tax payables, net and other tax payables (270
) (126 ) Increase (decrease) in other liabilities 497 452
Net cash provided by operating activities 2,182 1,505
INVESTING ACTIVITIES: Capital Expenditures (1,770 ) (1,687 )
Acquisitions, net of cash acquired (61 ) (17 ) Proceeds from the
sale of businesses, net of cash sold, and equity method investments
157 96 Sale of short-term investments 3,747 3,683 Purchase of
short-term investments (3,797 ) (3,605 ) Increase in restricted
cash, debt service reserves and other assets (123 ) (60 ) Other
investing (22 ) (49 ) Net cash used in investing activities (1,869
) (1,639 ) FINANCING ACTIVITIES: Borrowings under the revolving
credit facilities 1,079 677 Repayments under the revolving credit
facilities (856 ) (644 ) Issuance of recourse debt 500 575
Repayments of recourse debt (808 ) (915 ) Issuance of non-recourse
debt 2,118 3,281 Repayments of non-recourse debt (1,720 ) (2,468 )
Payments for financing fees (86 ) (65 ) Distributions to
noncontrolling interests (356 ) (182 ) Contributions from
noncontrolling interests and redeemable security holders 154 117
Proceeds from the sale of redeemable stock of subsidiaries 134 461
Dividends paid on AES common stock (218 ) (209 ) Payments for
financed capital expenditures (108 ) (110 ) Purchase of treasury
stock (79 ) (408 ) Other financing (12 ) (24 ) Net cash (used in)
provided by financing activities (258 ) 86 Effect of
exchange rate changes on cash 7 (40 ) Decrease in cash of
discontinued operations and held-for-sale businesses 6 7 Total
increase (decrease) in cash and cash equivalents 68 (81 ) Cash and
cash equivalents, beginning 1,257 1,517 Cash and cash
equivalents, ending $ 1,325 $ 1,436 SUPPLEMENTAL
DISCLOSURES: Cash payments for interest, net of amounts capitalized
$ 837 $ 875 Cash payments for income taxes, net of refunds $ 425 $
319 SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Assets acquired through capital lease and
other liabilities
$ 5 $ 12
THE AES CORPORATIONNON-GAAP FINANCIAL
MEASURES(Unaudited)
AES is a holding company that derives its income and cash flows
from the activities of its subsidiaries, some of which may not be
wholly-owned by the Company. Accordingly, the Company has presented
certain financial metrics which are defined as Proportional (a
non-GAAP financial measure). Proportional metrics present the
Company's estimate of its share in the economics of the underlying
metric. The Company believes that the proportional metrics are
useful to investors because they exclude the economic share in the
metric presented that is held by non-AES shareholders.
Proportional metrics are reconciled to the nearest GAAP measure.
Certain assumptions have been made to estimate our proportional
financial measures. These assumptions include: (i) the Company's
economic interest has been calculated based on a blended rate for
each consolidated business when such business represents multiple
legal entities; (ii) the Company's economic interest may differ
from the percentage implied by the recorded net income or loss
attributable to noncontrolling interests or dividends paid during a
given period; (iii) the Company's economic interest for entities
accounted for using the hypothetical liquidation at book value
method is 100%; (iv) individual operating performance of the
Company's equity method investments is not reflected and (v)
inter-segment transactions are included as applicable for the
metric presented.
The Company's non-GAAP metrics are Proportional Free Cash Flow,
Adjusted pre-tax contribution (“adjusted PTC”) and Adjusted
earnings per share (“adjusted EPS”) used by management and external
users of our consolidated financial statements such as investors,
industry analysts and lenders.
Proportional Free Cash Flow is defined as cash flows from
operating activities (adjusted for service concession asset capital
expenditures), less maintenance capital expenditures (including
non-recoverable environmental capital costs and net of reinsurance
proceeds) adjusted for the estimated impact of noncontrolling
interests. Proportional Free Cash Flow in each SBU includes the
effect of intercompany transactions with other SBUs except for
interest, tax sharing, charges for management fees and transfer
pricing. The proportionate share of cash flows and related
adjustments attributable to noncontrolling interest in our
subsidiaries comprise the proportional adjustment factor presented
in the reconciliation below.
The GAAP measure most comparable to Proportional Free Cash Flow
is Net Cash Flows Provided By Operating Activities. We believe that
Proportional Free Cash Flow better reflects the underlying business
performance of the Company, as it measures the cash generated by
the business, after the funding of maintenance capital
expenditures, that may be available for investing or repaying debt
or other purposes. Factors in this determination include the impact
of noncontrolling interest, where AES consolidates the results of a
subsidiary that is not wholly-owned by the Company.
Three Months Ended Nine Months Ended September
30, September 30, 2016 2015 2016
2015 (in millions)
Calculation of Maintenance Capital
Expenditures for Free Cash Flow (1)
ReconciliationBelow:
Maintenance Capital Expenditures $ 144 $ 111 $ 464 $ 417
Environmental Capital Expenditures $ 43 63 198 193 Growth Capital
Expenditures 349 371 1,216 1,187
Total Capital Expenditures $ 536
$ 545 $ 1,878 $
1,797
Reconciliation
of Proportional Adjusted Operating Cash Flow (2)
Consolidated Operating Cash Flow $ 819 $ 915 $ 2,182 $ 1,505 Add:
Capital Expenditures Related to Service Concession Assets (3) 1 77
27 148 Less: Proportional Adjustment Factor (2) (5) (313 ) (276 )
(787 ) (361 )
Proportional Adjusted Operating Cash Flow
(2) (5) $ 507 $ 716
$ 1,422 $ 1,292
Reconciliation of Free Cash Flow
(1) Consolidated Operating Cash Flow $ 819 $ 915 $ 2,182 $
1,505 Add: Capital Expenditures Related to Service Concession
Assets (3) 1 77 27 148 Less: Maintenance Capital Expenditures, net
of reinsurance proceeds (144 ) (111 ) (464 ) (417 ) Less:
Non-Recoverable Environmental Capital Expenditures (11 ) (17 ) (36
) (43 )
Free Cash Flow (1) $ 665
$ 864 $ 1,709 $
1,193
Reconciliation
of Proportional Free Cash Flow (1) (2) Proportional
Operating Cash Flow (2) $ 506 $ 677 $ 1,408 $ 1,216 Add:
Proportional Capital Expenditures Related to Service Concession
Assets (3) 1 39 14 76
Proportional
Adjusted Operating Cash Flow (2) (5) 507
716 1,422 1,292 Less: Proportional Maintenance
Capital Expenditures, net of reinsurance proceeds (2) (96) (80 )
(322 ) (310 ) Less: Proportional Non-Recoverable Environmental
Capital Expenditures (2) (4) (11) (15 ) (30 ) (34 )
Proportional Free Cash Flow (1) (2) $
400 $ 621 $ 1,070
$ 948 (1) Free cash flow
(a non-GAAP financial measure) is proportional free cash flow as
defined above but inclusive of noncontrolling interest impacts. (2)
The proportional adjustment factor, proportional maintenance
capital expenditures (net of reinsurance proceeds) and proportional
non-recoverable environmental capital expenditures are calculated
by multiplying the percentage owned by noncontrolling interests for
each entity by its corresponding consolidated cash flow metric and
are totaled to the resulting figures. For example, Parent Company A
owns 80% of Subsidiary Company B, a consolidated subsidiary. Thus,
Subsidiary Company B has a 20% noncontrolling interest. Assuming a
consolidated net cash flow from operating activities of $100 from
Subsidiary B, the proportional adjustment factor for Subsidiary B
would equal ($20), or $100 x (20%). The Company calculates the
proportional adjustment factor for each consolidated business in
this manner and then sums these amounts to determine the total
proportional adjustment factor used in the reconciliation. The
proportional adjustment factor may differ from the proportion of
income attributable to noncontrolling interests as a result of (a)
non-cash items which impact income but not cash and (b) AES'
ownership interest in the subsidiary where such items occur. (3)
Service concession asset expenditures excluded from free cash flow
and proportional free cash flow non-GAAP metric due to the adoption
of service concession accounting effective January 1, 2015. (4)
Excludes IPALCO’s proportional recoverable environmental capital
expenditures of $22 million and $35 million for the three months
ended September 30, 2016 and 2015, as well as, $116 million and
$121 million for the nine months ended September 30, 2016 and 2015,
respectively. (5) Includes proportional adjustment amount for
service concession asset expenditures of $1 million and $39 million
for the three months ended September 30, 2016 and 2015, as well as,
$14 million and $76 million for the nine months ended September 30,
2016 and June 30, 2015, respectively. The Company adopted service
concession accounting effective January 1, 2015.
THE AES CORPORATIONNON-GAAP FINANCIAL
MEASURES(Unaudited)
RECONCILIATION OF ADJUSTED PRE-TAX
CONTRIBUTION (PTC) AND ADJUSTED EPS
Adjusted PTC is defined as pre-tax income from continuing
operations attributable to AES excluding gains or losses of the
consolidated entity due to (a) unrealized gains or losses
related to derivative transactions, (b) unrealized foreign
currency gains or losses, (c) gains or losses due to
dispositions and acquisitions of business interests,
(d) losses due to impairments, and (e) costs due to the
early retirement of debt. Adjusted PTC also includes net equity in
earnings of affiliates on an after-tax basis adjusted for the same
gains or losses excluded from consolidated entities.
Adjusted EPS is defined as diluted earnings per share from
continuing operations excluding gains or losses of both
consolidated entities and entities accounted for under the equity
method due to (a) unrealized gains or losses related to
derivative transactions, (b) unrealized foreign currency gains
or losses, (c) gains or losses due to dispositions and
acquisitions of business interests, (d) losses due to
impairments, and (e) costs due to the early retirement of
debt.
The GAAP measure most comparable to adjusted PTC is income from
continuing operations attributable to AES. The GAAP measure most
comparable to adjusted EPS is diluted earnings per share from
continuing operations. We believe that adjusted PTC and adjusted
EPS better reflect the underlying business performance of the
Company and are considered in the Company’s internal evaluation of
financial performance. Factors in this determination include
the variability due to unrealized gains or losses related to
derivative transactions, unrealized foreign currency gains or
losses, losses due to impairments and strategic decisions to
dispose of or acquire business interests or retire debt, which
affect results in a given period or periods. In addition, for
adjusted PTC, earnings before tax represents the business
performance of the Company before the application of statutory
income tax rates and tax adjustments, including the effects of tax
planning, corresponding to the various jurisdictions in which the
Company operates. Adjusted PTC and adjusted EPS should not be
construed as alternatives to income from continuing operations
attributable to AES and diluted earnings per share from continuing
operations, which are determined in accordance with GAAP.
Three Months EndedSeptember 30,
2016
Three Months EndedSeptember 30,
2015
Nine Months EndedSeptember 30,
2016
Nine Months EndedSeptember 30,
2015
Net ofNCI(1)
Per Share(Diluted) Netof NCI(1)
Net ofNCI(1)
Per Share(Diluted) Net ofNCI(1)
Net ofNCI(1)
Per Share(Diluted) Netof NCI(1)
Net ofNCI(1)
Per Share(Diluted) Netof NCI(1)
(in millions, except per share amounts)
Income (Loss) from
ContinuingOperations Attributable to AES andDiluted
EPS
$ 176 $ 0.26 (2)
$ 175
$ 0.26 $ 208 $ 0.31 (3)
$ 403 $ 0.58
Add: Income Tax Expense (Benefit)
fromContinuing Operations Attributable toAES
47 10 66 113 Pre-Tax Contribution
$ 223 $ 185 $ 274
$ 516 Adjustments Unrealized Derivative
Losses/(Gains) $ 5 $ — $ (12 ) $ (0.02 ) $ 1 $ — $ (29 ) $ (0.04 )
Unrealized Foreign Currency
TransactionLosses
3 0.01 5 0.01 12 0.01 48 0.07 Disposition/Acquisition (Gains) (3 )
— (23 ) (0.03 ) (4) (5 ) — (5) (32 ) (0.05 ) (4) Impairment Losses
24 0.03 (6) 139 0.20 (7) 309 0.47 (8) 175 0.25 (9) Loss on
Extinguishment of Debt 20 0.04 (10) 21 0.03 26 0.05 (11) 159 0.23
(12) Less: Net Income Tax (Benefit) (0.02 )
(0.07 ) (13) (0.20 ) (14)
(0.14 ) (15)
Adjusted PTC and Adjusted
EPS $ 272 $ 0.32
$ 315 $ 0.38 $
617 $ 0.64 $ 837
$ 0.90
_____________________________ (1) NCI is defined as
Noncontrolling Interests. (2) Diluted EPS calculation includes
income from continuing operations, net of tax, of $176 million less
the $5 million adjustment to retained earnings to record the
DP&L redeemable preferred stock at its redemption value as of
September 30, 2016. (3) Diluted EPS calculation includes income
from continuing operations, net of tax, of $208 million less the $5
million adjustment to retained earnings to record the DP&L
redeemable preferred stock at its redemption value as of September
30, 2016. (4) Amount primarily relates to the gain on sale of
Armenia Mountain of $22 million, or $0.03 per share. (5) Amount
primarily relates to the gain on sale of DPLER of $22 million, or
$0.03 per share; offset by the loss on deconsolidation of UK Wind
of $20 million, or $0.03 per share. (6) Amount primarily relates to
the asset impairment at Buffalo Gap I of $78 million ($23 million,
or $0.03 per share, net of NCI). (7) Amount primarily relates to
asset impairments at Buffalo Gap III of $118 million ($27 million,
or $0.04 per share, net of NCI); and $113 million at Kilroot ($112
million, or $0.16 per share, net of NCI). (8) Amount primarily
relates to asset impairments at DPL of $235 million, or $0.36 per
share; $159 million at Buffalo Gap II ($49 million, or $0.07 per
share, net of NCI); and $78 million at Buffalo Gap I ($23 million,
or $0.03 per share, net of NCI). (9) Amount primarily relates to
asset impairments at Buffalo Gap III of $118 million ($27 million,
or $0.04 per share, net of NCI); $113 million at Kilroot ($112
million, or $0.16 per share, net of NCI); and $38 million at UK
Wind ($30 million or $0.04 per share, net of NCI). (10) Amount
primarily relates to losses on early retirement of debt at the
Parent Company of $17 million, or $0.02 per share; and an
adjustment of $5 million, or $0.01 per share to record the DP&L
redeemable preferred stock at its redemption value. (11) Amount
primarily relates to losses on early retirement of debt at the
Parent Company of $19 million, or $0.03 per share; and an
adjustment of $5 million, or $0.01 per share, to record the
DP&L redeemable preferred stock at its redemption value. (12)
Amount primarily relates to losses on early retirement of debt at
the Parent Company of $113 million, or $0.16 per share; and $22
million at IPL ($16 million or $0.02 per share, net of NCI). (13)
Amount primarily relates to the per share income tax benefit
associated with impairment losses of $46 million, or $0.06 in the
three months ended September 30, 2015. (14) Amount primarily
relates to the per share income tax benefit associated with
impairment losses of $123 million, or $0.19 in the nine months
ended September 30, 2016. (15) Amount primarily relates to the per
share income tax benefit associated with losses on extinguishment
of debt of $51 million, or $0.08 and impairment losses of $48
million, or $0.07 in the nine months ended September 30, 2015.
The AES Corporation Parent Financial Information
Parent only data: last four quarters (in millions)
4
Quarters Ended Total subsidiary distributions &
returns of capital to Parent
September30, 2016
June 30, 2016
March 31,2016
December 31,2015
Actual Actual
Actual Actual Subsidiary
distributions(1) to Parent & QHCs $ 1,242 $ 1,070 $ 968 $ 1,057
Returns of capital distributions to Parent & QHCs 34
30 24 8
Total subsidiary
distributions & returns of capital to Parent $
1,276 $ 1,100
$ 992 $ 1,065 Parent
only data: quarterly (in millions)
Quarter Ended
Total subsidiary distributions & returns of capital to
Parent
September 30,2016
June 30, 2016
March 31,2016
December 31,2015
Actual Actual
Actual Actual Subsidiary
distributions(1) to Parent & QHCs $ 265 $ 337 $ 85 $ 555
Returns of capital distributions to Parent & QHCs 4
14 16 0
Total
subsidiary distributions & returns of capital to Parent
$ 269 $ 351
$ 101 $ 555
Parent Company Liquidity (2) (in
millions)
Balance at
September30, 2016
June 30, 2016
March 31,2016
December 31,2015
Actual Actual
Actual Actual Cash at Parent & Cash
at QHCs (3) $ 42 $ 30 $ 17 $ 400 Availability under credit
facilities 519 733 658
738
Ending liquidity $ 561
$ 763 $ 675
$ 1,138 (1) Subsidiary distributions
should not be construed as an alternative to Net Cash Provided by
Operating Activities which is determined in accordance with GAAP.
Subsidiary distributions are important to the Parent Company
because the Parent Company is a holding company that does not
derive any significant direct revenues from its own activities but
instead relies on its subsidiaries’ business activities and the
resultant distributions to fund the debt service, investment and
other cash needs of the holding company. The reconciliation of the
difference between the subsidiary distributions and the Net Cash
Provided by Operating Activities consists of cash generated from
operating activities that is retained at the subsidiaries for a
variety of reasons which are both discretionary and
non-discretionary in nature. These factors include, but are not
limited to, retention of cash to fund capital expenditures at the
subsidiary, cash retention associated with non-recourse debt
covenant restrictions and related debt service requirements at the
subsidiaries, retention of cash related to sufficiency of local
GAAP statutory retained earnings at the subsidiaries, retention of
cash for working capital needs at the subsidiaries, and other
similar timing differences between when the cash is generated at
the subsidiaries and when it reaches the Parent Company and related
holding companies. (2) Parent Company Liquidity is defined as cash
at the Parent Company plus available borrowings under existing
credit facility plus cash at qualified holding companies (QHCs).
AES believes that unconsolidated Parent Company liquidity is
important to the liquidity position of AES as a Parent Company
because of the non-recourse nature of most of AES’ indebtedness.
(3) The cash held at QHCs represents cash sent to subsidiaries of
the company domiciled outside of the US. Such subsidiaries had no
contractual restrictions on their ability to send cash to AES, the
Parent Company. Cash at those subsidiaries was used for investment
and related activities outside of the US. These investments
included equity investments and loans to other foreign subsidiaries
as well as development and general costs and expenses incurred
outside the US. Since the cash held by these QHCs is available to
the Parent, AES uses the combined measure of subsidiary
distributions to Parent and QHCs as a useful measure of cash
available to the Parent to meet its international liquidity needs.
THE AES CORPORATION2016
FINANCIAL GUIDANCE ELEMENTS(1), (2)
2016 Financial Guidance As of 11/4/16
Consolidated Proportional Income
Statement Guidance Adjusted Earnings Per Share (3) $0.95-$1.05
Cash Flow Guidance Net Cash Provided by Operating Activities
$2,000-$2,900 million Free Cash Flow (4) $1,000-$1,350 million
Reconciliation of Free Cash Flow Guidance Net Cash from
Operating Activities $2,000-$2,900 million $1,500-$1,850 million
Less: Maintenance Capital Expenditures $600-$800 million $400-$600
million Free Cash Flow (4) $1,300-$2,200 million $1,000-$1,350
million (1) 2016 Guidance is based on expectations
for future foreign exchange rates and commodity prices as of
September 30, 2016. (2) AES is a holding company that
derives its income and cash flows from the activities of its
subsidiaries, some of which may not be wholly-owned by the Company.
Accordingly, the Company has presented certain financial metrics
which are defined as Proportional (a non-GAAP financial measure).
Proportional metrics present the Company's estimate of its share in
the economics of the underlying metric. The Company believes that
the Proportional metrics are useful to investors because they
exclude the economic share in the metric presented that is held by
non-AES shareholders. For example, Net Cash Provided by Operating
Activities (Operating Cash Flow) is a GAAP metric which presents
the Company's cash flow from operations on a consolidated basis,
including operating cash flow allocable to noncontrolling
interests. Proportional Operating Cash Flow removes the share of
operating cash flow allocable to noncontrolling interests and
therefore may act as an aid in the valuation of the Company.
Beginning in Q1 2015, the definition was revised to also exclude
cash flows related to service concession assets. Proportional
metrics are reconciled to the nearest GAAP measure. Certain
assumptions have been made to estimate our proportional financial
measures. These assumptions include: (i) the Company's economic
interest has been calculated based on a blended rate for each
consolidated business when such business represents multiple legal
entities; (ii) the Company's economic interest may differ from the
percentage implied by the recorded net income or loss attributable
to noncontrolling interests or dividends paid during a given
period; (iii) the Company's economic interest for entities
accounted for using the hypothetical liquidation at book value
method is 100%; (iv) individual operating performance of the
Company's equity method investments is not reflected and (v)
inter-segment transactions are included as applicable for the
metric presented. (3) Adjusted Earnings Per Share (a
non-GAAP financial measure) is defined as diluted earnings per
share from continuing operations excluding gains or losses of both
consolidated entities and entities accounted for under the equity
method due to (a) unrealized gains or losses related to derivative
transactions, (b) unrealized foreign currency gains or losses, (c)
gains or losses due to dispositions and acquisitions of business
interests, d) losses due to impairments, and (e) costs due to the
early retirement of debt. The GAAP measure most comparable to
Adjusted EPS is diluted earnings per share from continuing
operations. AES believes that adjusted earnings per share better
reflects the underlying business performance of the Company, and is
considered in the Company's internal evaluation of financial
performance. Factors in this determination include the variability
due to unrealized gains or losses related to derivative
transactions, unrealized foreign currency gains or losses, losses
due to impairments and strategic decisions to dispose or acquire
business interests or retire debt, which affect results in a given
period or periods. Adjusted earnings per share should not be
construed as an alternative to diluted earnings per share from
continuing operations, which is determined in accordance with GAAP.
(4) Free Cash Flow is reconciled above. Free cash flow (a
non-GAAP financial measure) is defined as net cash from operating
activities (adjusted for service concession asset capital
expenditures) less maintenance capital expenditures (including
non-recoverable environmental capital expenditures), net of
reinsurance proceeds from third parties. AES believes that free
cash flow is a useful measure for evaluating our financial
condition because it represents the amount of cash provided by
operations less maintenance capital expenditures as defined by our
businesses, that may be available for investing or for repaying
debt.
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version on businesswire.com: http://www.businesswire.com/news/home/20161104005204/en/
The AES CorporationInvestors:Ahmed Pasha,
703-682-6451orMedia:Vincent Sipowicz, 703-682-6476
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