Q1 2019 Strategic Highlights
- On track to attain investment grade
credit ratings in 2020
- Signed long-term contracts for 494 MW
of renewable capacity, increasing backlog to 6.2 GW
- Signed a 12-year agreement to sell up
to 18 TBTU of LNG annually in the Caribbean, beginning in 2020
- Announcing $100 million incremental
annual run rate cost savings target, to be realized by 2022 from
digital initiatives
- Agreed to sell the Company's interests
in its businesses in Jordan and Northern Ireland for $211
million
Q1 2019 Financial Highlights
- Diluted EPS of $0.23, compared to $1.03
in Q1 2018, which included a gain on the sale of Masinloc in the
Philippines
- Adjusted EPS of $0.28, compared to
$0.28 in Q1 20181
- Reaffirming 2019 guidance and 7% to 9%
average annual growth target for Adjusted EPS and Parent Free Cash
Flow through 20221
The AES Corporation (NYSE: AES) today reported financial results
for the quarter ended March 31, 2019.
"We continue to execute on our strategic plan: de-risking our
portfolio; growing our LNG and renewables businesses; and becoming
a technology leader," said Andrés Gluski, AES President and Chief
Executive Officer. "We agreed to sell our assets in Jordan and
Northern Ireland, which will reduce our footprint to 13 countries.
We also signed a long-term LNG tolling agreement for up to 18 TBTU
annually and grew our backlog of mostly renewable projects to 6.2
GW. Today, we are announcing a target of an additional $100 million
in annual cost savings by 2022 from our digital initiatives that
are currently underway."
"With our first quarter 2019 performance in line with our
expectations, we are off to a solid start to deliver on our full
year 2019 guidance and our 7% to 9% average annual growth target
through 2022," said Gustavo Pimenta, AES Executive Vice President
and Chief Financial Officer. "Our strong and growing cash flow,
combined with our significant debt reduction in 2018, keep us on
track to attain investment grade ratings by 2020."
Key Q1 2019 Financial Results
First quarter 2019 Diluted Earnings Per Share from Continuing
Operations (Diluted EPS) was $0.23, a decrease of $0.80 compared to
first quarter 2018, primarily reflecting the $0.94 net gain on the
sale of Masinloc in the Philippines in 2018, partially offset by
the $0.18 net loss on extinguishment of debt in 2018.
First quarter 2019 Adjusted Earnings Per Share (Adjusted EPS, a
non-GAAP financial measure) was $0.28, which was unchanged compared
to first quarter 2018, primarily reflecting the impact of asset
sales and dispositions in the Eurasia and US and Utilities
Strategic Business Units (SBU), partially offset by lower Parent
interest and a lower effective tax rate.
Detailed Strategic Highlights
- As of March 31, 2019, the Company's
backlog of 6,225 MW includes:
- 3,845 MW under construction and
expected on-line through 2021; and
- 2,380 MW of renewables signed under
long-term Power Purchase Agreements (PPAs), including 494 MW signed
in year-to-date 2019:
- 219 MW of solar plus storage at AES
Distributed Energy (AES DE) with utilities and commercial and
industrial customers in the U.S.
- 175 MW of solar at sPower with a
utility in the U.S.
- 100 MW of energy storage with a utility
in the U.S.
- In March and April, the Company agreed
to sell its interests in its businesses in Jordan and Northern
Ireland for $211 million
- Once these transactions close, which is
expected later this year, the Company will have operations in 13
countries, down from 28 in 2011
- The Company is announcing a $100
million incremental annual run rate cost savings target, to be
realized by 2022 from digital initiatives, including utilizing data
and technology for maintenance, outage prevention, inspection and
procurement
Guidance and Expectations1
The Company reaffirms its 2019 Adjusted EPS guidance of $1.28 to
$1.40 and its average annual growth rate target of 7% to 9% through
2022. Growth in 2019 will be primarily driven by contributions from
new businesses, cost savings and lower Parent interest.
The Company also reaffirms its 2019 Parent Free Cash Flow
expectation of $700 million to $750 million and its average annual
growth rate target of 7% to 9% through 2022.
1 Adjusted EPS and Parent Free Cash Flow are non-GAAP
financial measures. See attached "Non-GAAP Measures" for definition
of Adjusted EPS and see below for definition of Parent Free Cash
Flow. The Company is not able to provide a corresponding GAAP
equivalent or reconciliation for its Adjusted EPS guidance or its
Parent Free Cash Flow expectation without unreasonable effort. See
"Non-GAAP measures" for a description of the adjustments to
reconcile Adjusted EPS to Diluted EPS for the quarter ended March
31, 2019.
Non-GAAP Financial Measures
See Non-GAAP Measures for definitions of Adjusted Earnings Per
Share and Adjusted Pre-Tax Contributions, as well as
reconciliations to the most comparable GAAP financial measures.
Parent Free Cash Flow should not be construed as an alternative
to Net Cash Provided by Operating Activities which is determined in
accordance with GAAP. Parent Free Cash Flow is equal to Subsidiary
Distributions less cash used for interest costs, development,
general and administrative activities, and tax payments by the
Parent Company. Parent Free Cash Flow is used for dividends, share
repurchases, growth investments, recourse debt repayments, and
other uses by the Parent Company.
Attachments
Condensed Consolidated Statements of Operations, Segment
Information, Condensed Consolidated Balance Sheets, Condensed
Consolidated Statements of Cash Flows, Non-GAAP Financial Measures
and Parent Financial Information.
Conference Call Information
AES will host a conference call on Tuesday, May 7, 2019 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 1733093.
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 500 global power
company. We provide affordable, sustainable energy to 15 countries
through our diverse portfolio of distribution businesses as well as
thermal and renewable generation facilities. Our workforce is
committed to operational excellence and meeting the world’s
changing power needs. Our 2018 revenues were $11 billion and we own
and manage $33 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
the execution of PPAs, conversion of our backlog and 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’ 2018 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 2018 Annual
Report on Form 10-K filed February 27, 2019 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 CORPORATION Condensed Consolidated
Statements of Operations (Unaudited) Three Months
Ended March 31, 2019 2018
(in millions, exceptper share
amounts)
Revenue: Regulated $ 785 $ 722 Non-Regulated 1,865 2,018
Total revenue 2,650 2,740 Cost of Sales:
Regulated (635 ) (601 ) Non-Regulated (1,429 ) (1,483 ) Total cost
of sales (2,064 ) (2,084 ) Operating margin 586 656
General and administrative expenses (46 ) (56 ) Interest expense
(265 ) (281 ) Interest income 79 76 Loss on extinguishment of debt
(10 ) (170 ) Other expense (12 ) (9 ) Other income 30 13 Gain
(loss) on disposal and sale of business interests (4 ) 788 Foreign
currency transaction losses (4 ) (19 ) INCOME FROM CONTINUING
OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF AFFILIATES 354
998 Income tax expense (115 ) (231 ) Net equity in earnings
(losses) of affiliates (6 ) 11 INCOME FROM CONTINUING
OPERATIONS 233 778 Loss from operations of discontinued businesses
— (1 ) NET INCOME 233 777 Less: Income from continuing
operations attributable to noncontrolling interests and redeemable
stock of subsidiaries (79 ) (93 ) NET INCOME ATTRIBUTABLE TO THE
AES CORPORATION $ 154 $ 684 AMOUNTS ATTRIBUTABLE TO
THE AES CORPORATION COMMON STOCKHOLDERS: Income from continuing
operations, net of tax $ 154 $ 685 Loss from discontinued
operations, net of tax — (1 ) NET INCOME ATTRIBUTABLE TO THE
AES CORPORATION $ 154 $ 684 BASIC EARNINGS PER SHARE:
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS
$ 0.23 $ 1.04 DILUTED EARNINGS PER SHARE: NET INCOME
ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS $ 0.23
$ 1.03 DILUTED SHARES OUTSTANDING 667 663
THE AES CORPORATION Strategic Business Unit (SBU)
Information (Unaudited) Three Months
Ended March 31, (in millions) 2019 2018
REVENUE US and Utilities SBU $ 1,019 $ 1,027 South America
SBU 845 895 MCAC SBU 450 408 Eurasia SBU 339 419 Corporate and
Other 9 9 Eliminations (12 ) (18 ) Total Revenue $ 2,650 $
2,740
THE AES CORPORATION Condensed
Consolidated Balance Sheets (Unaudited)
March 31, 2019
December 31,2018
(in millions, except shareand
per share data)
ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,426 $
1,166 Restricted cash 519 370 Short-term investments 378 313
Accounts receivable, net of allowance for doubtful accounts of $23
and $23, respectively 1,564 1,595 Inventory 579 577 Prepaid
expenses 111 130 Other current assets 703 807 Current held-for-sale
assets 575 57 Total current assets 5,855 5,015
NONCURRENT ASSETS Property, Plant and Equipment: Land 450
449 Electric generation, distribution assets and other 24,844
25,242 Accumulated depreciation (8,273 ) (8,227 ) Construction in
progress 4,207 3,932 Property, plant and equipment,
net 21,228 21,396 Other Assets: Investments in and
advances to affiliates 1,147 1,114 Debt service reserves and other
deposits 430 467 Goodwill 1,059 1,059 Other intangible assets, net
of accumulated amortization of $467 and $457, respectively 467 436
Deferred income taxes 108 97 Loan receivable 1,406 1,423 Other
noncurrent assets 1,771 1,514 Total other assets
6,388 6,110 TOTAL ASSETS $ 33,471 $ 32,521
LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts
payable $ 1,224 $ 1,329 Accrued interest 265 191 Accrued non-income
taxes 271 250 Accrued and other liabilities 914 962 Non-recourse
debt, including $338 and $479, respectively, related to variable
interest entities 1,265 1,659 Current held-for-sale liabilities 418
8 Total current liabilities 4,357 4,399
NONCURRENT LIABILITIES Recourse debt 3,895 3,650 Non-recourse debt,
including $3,077 and $2,922 respectively, related to variable
interest entities 14,550 13,986 Deferred income taxes 1,302 1,280
Other noncurrent liabilities 2,828 2,723 Total
noncurrent liabilities 22,575 21,639 Commitments and
Contingencies Redeemable stock of subsidiaries 890 879 EQUITY THE
AES CORPORATION STOCKHOLDERS’ EQUITY
Common stock ($0.01 par value,
1,200,000,000 shares authorized; 817,593,854 issued and 663,694,956
outstanding at March 31, 2019 and 817,203,691 issued and
662,298,096 outstanding at December 31, 2018)
8 8 Additional paid-in capital 8,039 8,154 Accumulated deficit (839
) (1,005 ) Accumulated other comprehensive loss (2,107 ) (2,071 )
Treasury stock, at cost (153,898,898 and
154,905,595 shares at March 31, 2019 and December 31, 2018,
respectively)
(1,867 ) (1,878 ) Total AES Corporation stockholders’ equity 3,234
3,208 NONCONTROLLING INTERESTS 2,415 2,396 Total
equity 5,649 5,604 TOTAL LIABILITIES AND EQUITY $
33,471 $ 32,521
THE AES
CORPORATION Condensed Consolidated Statements of Cash
Flows (Unaudited)
Three Months Ended March 31,
2019 2018 (in millions) OPERATING
ACTIVITIES: Net income $ 233 $ 777 Adjustments to net income:
Depreciation and amortization 246 254 Loss (gain) on disposal and
sale of business interests 4 (788 ) Deferred income taxes 62 180
Loss on extinguishment of debt 10 170 Loss on sale and disposal of
assets 7 2 Other 99 72 Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 9 (39 ) (Increase)
decrease in inventory (18 ) (16 ) (Increase) decrease in prepaid
expenses and other current assets 47 (33 ) (Increase) decrease in
other assets 2 19 Increase (decrease) in accounts payable and other
current liabilities 25 (66 ) Increase (decrease) in income tax
payables, net and other tax payables (35 ) — Increase (decrease) in
other liabilities (1 ) (17 ) Net cash provided by operating
activities 690 515 INVESTING ACTIVITIES: Capital
expenditures (504 ) (495 ) Proceeds from the sale of business
interests, net of cash and restricted cash sold — 1,180 Sale of
short-term investments 150 149 Purchase of short-term investments
(220 ) (345 ) Contributions to equity affiliates (90 ) (44 ) Other
investing 1 (29 ) Net cash provided by (used in) investing
activities (663 ) 416 FINANCING ACTIVITIES: Borrowings under
the revolving credit facilities 504 881 Repayments under the
revolving credit facilities (274 ) (783 ) Issuance of recourse debt
— 1,000 Repayments of recourse debt (1 ) (1,774 ) Issuance of
non-recourse debt 866 757 Repayments of non-recourse debt (428 )
(510 ) Payments for financing fees (4 ) (14 ) Distributions to
noncontrolling interests (50 ) (17 ) Contributions from
noncontrolling interests and redeemable security holders 10 11
Dividends paid on AES common stock (90 ) (86 ) Payments for
financed capital expenditures (96 ) (89 ) Other financing (35 ) (6
) Net cash provided by (used in) financing activities 402
(630 ) Effect of exchange rate changes on cash, cash equivalents
and restricted cash (4 ) 5 (Increase) decrease in cash, cash
equivalents and restricted cash of discontinued operations and
held-for-sale businesses (53 ) 74 Total increase in cash,
cash equivalents and restricted cash 372 380 Cash, cash equivalents
and restricted cash, beginning 2,003 1,788 Cash, cash
equivalents and restricted cash, ending $ 2,375 $ 2,168
SUPPLEMENTAL DISCLOSURES: Cash payments for interest, net of
amounts capitalized $ 169 $ 207 Cash payments for income taxes, net
of refunds $ 65 $ 71 SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES: Non-cash contributions of assets and liabilities for
the Fluence transaction $ — $ 20 Dividends declared but not yet
paid $ 91 $ 86
THE AES CORPORATION NON-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 The AES Corporation excluding gains or
losses of the consolidated entity due to (a) unrealized gains or
losses related to derivative transactions and equity securities;
(b) unrealized foreign currency gains or losses; (c) gains, losses,
benefits and costs associated with dispositions and acquisitions of
business interests, including early plant closures; (d) losses due
to impairments; (e) gains, losses and costs due to the early
retirement of debt; and (f) costs directly associated with a major
restructuring program, including, but not limited to, workforce
reduction efforts, relocations, and office consolidation. 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 and equity securities; (b)
unrealized foreign currency gains or losses; (c) gains, losses,
benefits and costs associated with dispositions and acquisitions of
business interests, including early plant closures, and the tax
impact from the repatriation of sales proceeds; (d) losses due to
impairments; (e) gains, losses and costs due to the early
retirement of debt; (f) costs directly associated with a major
restructuring program, including, but not limited to, workforce
reduction efforts, relocations, and office consolidation; and (g)
tax benefit or expense related to the enactment effects of 2017
U.S. tax law reform and related regulations and any subsequent
period adjustments related to enactment effects. 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 or equity securities remeasurement, unrealized foreign
currency gains or losses, losses due to impairments and strategic
decisions to dispose of or acquire business interests, retire debt
or implement restructuring activities, 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 EndedMarch 31,
2019
Three Months EndedMarch 31,
2018
Net of NCI (1)
Per Share(Diluted) Netof NCI (1)
Net of NCI (1)
Per Share(Diluted) Netof NCI (1)
(in millions, except per share amounts) Income from
continuing operations, net of tax, attributable to AES and Diluted
EPS $ 154 $ 0.23 $
685 $ 1.03 Add: Income tax expense from
continuing operations attributable to AES 85 198
Pre-tax contribution
$ 239 $ 883
Adjustments Unrealized derivative and equity securities
losses $ 3 $ 0.01 $ 12 $ 0.02 Unrealized foreign currency losses
(gains) 11 0.02 (3 ) — Disposition/acquisition losses (gains) 9
0.01 (778 ) (1.17 ) (2) Impairment expense 2 — — — Loss on
extinguishment of debt 8 0.01 171 0.26 (3) Restructuring costs — —
3 — U.S. Tax Law Reform Impact 0.01 — Less: Net income tax expense
(benefit) (0.01 ) 0.14 (4)
Adjusted PTC and
Adjusted EPS $ 272 $ 0.28
$ 288 $ 0.28
_____________________________
(1)
NCI is defined as Noncontrolling Interests.
(2)
Amount primarily relates to gain on sale of Masinloc of $777
million, or $1.17 per share.
(3)
Amount primarily relates to loss on early retirement of debt at the
Parent Company of $169 million, or $0.26 per share.
(4)
Amount primarily relates to the income tax expense under the GILTI
provision associated with gain on sale of Masinloc of $155 million,
or $0.23 per share, partially offset by income tax benefits
associated with the loss on early retirement of debt at the Parent
Company of $53 million, or $0.08 per share.
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
March 31,2019
December 31,2018
September 30,2018
June 30,2018
Actual Actual Actual
Actual Subsidiary distributions (1) to Parent & QHCs $
1,035 $ 1,186 $ 1,255 $ 1,240 Returns of capital distributions to
Parent & QHCs — — (67 ) (65
)
Total subsidiary distributions & returns of capital to
Parent $ 1,035 $
1,186 $ 1,188
$ 1,175 Parent only data: quarterly (in
millions)
Quarter Ended
Total subsidiary
distributions & returns of capital to Parent
March 31,2019
December 31,2018
September 30,2018
June 30,2018
Actual Actual Actual
Actual Subsidiary distributions (1) to Parent & QHCs $
200 $ 390 $ 175 $ 270 Returns of capital distributions to Parent
& QHCs — — — —
Total subsidiary distributions & returns of capital to
Parent $ 200 $ 390
$ 175 $ 270
Parent Company
Liquidity (2)
(in millions)
Balance at
March 31,2019
December 31,2018
September 30,2018
June 30,2018
Actual Actual Actual
Actual Cash at Parent & Cash at QHCs (3) $ 34 $ 24 $ 43
$ 151 Availability under credit facilities 775 1,022
1,042 687
Ending
liquidity $ 809 $
1,046 $ 1,085
$ 838
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190507005466/en/
Investor Contact: Ahmed Pasha 703-682-6451Media Contact: Amy
Ackerman 703-682-6399
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