Highlights
- Reaffirming 2017 guidance and average
annual growth of 8% to 10% in Adjusted EPS and Consolidated Free
Cash Flow through 2020
- Results were adversely affected by a
higher quarterly tax rate and recent hurricanes in the Caribbean;
Diluted EPS was $0.23, a $0.03 decrease compared to the third
quarter of 2016 and Adjusted EPS was $0.24, an $0.08 decrease
compared to the third quarter of 2016
- On track to achieve $400 million in
annual cost savings and revenue enhancements by year-end 2020 and
aggressively evaluating additional opportunities
- Significantly increasing asset sales
target and now expects to realize $2 billion in proceeds from 2018
through 2020
The AES Corporation (NYSE: AES) today reported financial results
for the three months ended September 30, 2017.
Third quarter 2017 Diluted Earnings Per Share from Continuing
Operations (Diluted EPS) was $0.23, a decrease of $0.03 compared to
the third quarter of 2016, reflecting a higher quarterly tax rate
and the impact of recent hurricanes. These impacts were partially
offset by unrealized foreign currency gains and lower impairment
expense. Third quarter 2017 Adjusted Earnings Per Share (Adjusted
EPS, a non-GAAP financial measure) decreased $0.08 to $0.24,
reflecting a $0.05 impact from a higher quarterly adjusted
effective tax rate of 35% versus 23% in the third quarter of 2016
and a $0.02 impact largely for the reserves booked for
hurricane-related damages to the Company's businesses in Puerto
Rico and the U.S. Virgin Islands. On a full year 2017 basis, the
Company continues to expect a $0.03 to $0.05 impact of recent
hurricanes in the Caribbean and a full year 2017 adjusted effective
tax rate of 31% to 33%.
"We are upsizing our asset sales target in order to accelerate
our strategy and now expect to realize $2 billion of proceeds from
2018 to 2020. Further, while we are on track to achieve $400
million in annual cost savings and revenue enhancements by 2020 is
on track, we are aggressively reviewing our cost structure and see
potential for additional improvement," said Andrés Gluski, AES
President and Chief Executive Officer. "These initiatives will
allow us to continue to simplify our business mix and redeploy
capital to deliver an attractive total return to shareholders."
"Based on our year-to-date performance and outlook, we are
reaffirming our 2017 guidance and expectations through 2020," said
Tom O'Flynn, AES Executive Vice President and Chief Financial
Officer. "As a result of our growing cash flow and continued Parent
debt pay down, including $300 million this year, we expect to
achieve investment grade credit status by 2020."
Consolidated Net Cash Provided by Operating Activities for the
third quarter of 2017 was $735 million, a decrease of $84 million
compared to the third quarter of 2016. This decrease was primarily
driven by higher working capital requirements at the Company's
Brazil, US, and Mexico, Central America and the Caribbean (MCAC)
Strategic Business Units (SBU), which more than offset higher
consolidated margins. Third quarter 2017 Consolidated Free Cash
Flow (a non-GAAP financial measure) decreased $64 million to $601
million, compared to the third quarter of 2016, primarily due to
the same drivers as Consolidated Net Cash Provided by Operating
Activities.
Table 1: Key Financial Results
Third
Quarter
Year-to-DateSeptember
30,
Full Year 2017 Guidance $ in Millions, Except Per
Share Amounts
2017 2016
2017 2016 Diluted EPS from Continuing
Operations $ 0.23 $ 0.26 $ 0.27 $ 0.31 N/A Adjusted
EPS 1 $ 0.24 $ 0.32 $ 0.66 $ 0.64 $1.00-$1.10 2 Consolidated Net
Cash Provided by Operating Activities $ 735 $ 819 $ 1,689 $ 2,182
$2,000-$2,800 Consolidated Free Cash Flow 1 $ 601
$ 665 $ 1,253 $ 1,709
$1,400-$2,000 1 A non-GAAP financial measure. See
“Non-GAAP Financial Measures” for definitions and reconciliations
to the most comparable GAAP financial measures. 2 On October 9,
2017, the Company announced that it expected to be in the lower
half of the range.
Guidance and Expectations
The Company is reaffirming its 2017 guidance and expectations
through 2020. As disclosed on October 9, 2017, the Company expects
its Adjusted EPS to be in the lower half of the range due to the
$0.03 to $0.05 full year impact of recent hurricanes in the
Caribbean.
Table 2: Guidance and Expectations
$ in Millions, Except Per Share
Amounts
2017 Guidance 2020 Expectations
Adjusted EPS 1,2 $1.00-$1.10
8%-10% growth from mid-point of2016
guidance of $0.95-$1.05
Consolidated Net Cash Provided by Operating Activities
$2,000-$2,800 N/A Consolidated Free Cash Flow 1
$1,400-$2,000
8%-10% growth from mid-point of2016
expectation of $1,300-$2,200
1 A non-GAAP financial measure. See “Non-GAAP Financial
Measures” for definitions and reconciliations to the most
comparable GAAP financial measures. 2 The Company is not able to
provide a corresponding GAAP equivalent for its Adjusted EPS
guidance. In providing its full year 2017 Adjusted EPS guidance,
the Company notes that there could be differences between expected
reported earnings and estimated operating earnings, including the
items listed below. Therefore, management is not able to estimate
the aggregate impact, if any, of these items on reported earnings.
As of September 30, 2017, the impact of these items was as follows:
(a) unrealized gains or losses related to derivative transactions
represent a gain of $5 million, (b) unrealized foreign currency
gains or losses represent a gain of $34 million, (c) gains or
losses and associated benefits and costs due to dispositions and
acquisitions of business interests, including early plant closures,
and the tax impact of the repatriation of sales proceeds represent
a loss of $83 million, (d) losses due to impairments of $182
million and (e) gains, losses and costs due to the early retirement
of debt represent a loss of $29 million.
The Company expects 8% to 10% average annual growth in Parent
Free Cash Flow (a non-GAAP financial metric) through 2020 from the
mid-point of its 2016 expectation of $525 to $625 million. Subject
to Board approval, and in line with this reaffirmed expectation,
the Company continues to expect its shareholder dividend to grow 8%
to 10% annually on average, as well.
The Company's 2017 guidance is based on foreign currency and
commodity forward curves as of September 30, 2017. The Company's
expectations through 2020 are based on foreign currency and
commodity forward curves as of December 31, 2016.
Additional Highlights
- In July 2017, the Company and Siemens
announced the formation of Fluence, a joint venture to sell the
companies' energy storage platforms in more than 160 countries.
- The transaction is expected to close in
the fourth quarter of 2017, subject to customary regulatory
approvals.
- In September 2017, as a result of
Hurricanes Irma and Maria, the Company sustained modest damage to
its 24 MW Ilumina solar plant and minor damage to its 524 MW AES
Puerto Rico coal-fired plant, both located in Puerto Rico. Although
the transmission lines are out of service, both plants are
available to generate electricity and meet their obligations under
their Power Purchase Agreements (PPA). The Company's 5 MW USVI
Solar I plant in the U.S. Virgin Islands was materially damaged.
- As disclosed in October 2017, the full
year impact on the Company's 2017 Adjusted EPS is expected to be
$0.03 to $0.05, which is related to the damage to the three plants,
business interruption and deductibles under the Company's captive
insurance policy. In the third quarter of 2017 the Company recorded
an impact of $0.02, largely attributable to reserves booked for
hurricane-related damages.
- AES Puerto Rico continues to work
closely with first responders, including FEMA, the Puerto Rican
Electric Power Authority (PREPA) and all levels of government in
Puerto Rico, to put existing electric infrastructure assets back
on-line to help restore electric service as soon as possible.
- AES Puerto Rico has offered emergency
power and diesel to municipalities, hospitals and police
departments.
- AES Puerto Rico donated and helped
distribute thousands of gallons of water and canned food to both
AES people and local municipalities.
- In September 2017, the Company
completed two new lithium-ion battery-based energy storage
projects, for a total of 20 MW, in the Dominican Republic.
- The two projects played a key role in
maintaining grid reliability in September 2017 when Hurricanes Irma
and Maria struck the Dominican Republic.
- In the third quarter of 2017, the
Company invested in long-term renewable growth projects with
attractive returns.
- In July 2017, the Company
and Alberta Investment Management Corporation (AIMCo)
closed the acquisition of FTP Power LLC (sPower).
- In July 2017, the Company signed an
agreement to acquire the 306 MW Mesa La Paz wind development
project in Mexico. Subsequently, the Company contracted the project
under a 25-year PPA.
- Utilizing the debt capacity at Tiete in
Brazil, in September 2017, the Company finalized the acquisition of
the 75 MW Boa Hora solar project and signed an agreement to acquire
the 150 MW Bauru solar project. Both of these projects are
contracted under 20-year PPAs.
- In October 2017, the Public Utilities
Commission of Ohio approved DPL's Electric Security Plan (ESP), in
line with the terms in the previously executed Stipulation
Agreement.
- The Company currently has 4,795 MW of
capacity under construction and expected to come on-line through
2021.
- The Company is on track to achieve its
previously disclosed target of $400 million in annual run-rate cost
savings and revenue enhancements by 2020. This includes $250
million already realized through December 2016 and the remaining
$150 million to be realized through 2020.
Non-GAAP Financial Measures
See Non-GAAP Financial Measures for definitions of Consolidated
Free Cash Flow, Adjusted Earnings Per Share and Adjusted Pre-Tax
Contributions, as well as reconciliations to the most comparable
GAAP financial measures.
Attachments
Condensed Consolidated Statements of Operations, Segment
Information, Condensed Consolidated Balance Sheets, Condensed
Consolidated Statements of Cash Flows, Non-GAAP Financial Measures,
Parent Financial Information 2016 Financial Guidance Elements and
2017 Financial Guidance Elements.
Conference Call Information
AES will host a conference call on Thursday, November 2,
2017 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
9189879. 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 16 countries
through our diverse portfolio of distribution businesses as well as
thermal and renewable generation facilities. Our workforce of
19,000 people is committed to operational excellence and meeting
the world’s changing power needs. Our 2016 revenues were $14
billion and we own and manage $36 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’ 2016 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 2016 Annual
Report on Form 10-K dated on or about February 27, 2017 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 September 30, Nine Months Ended
September 30, 2017 2016 2017
2016 (in millions, except per share amounts)
Revenue: Regulated $ 1,793 $ 1,785 $ 5,157 $ 4,926 Non-Regulated
1,839 1,757 5,437 5,116 Total revenue
3,632 3,542 10,594 10,042 Cost of
Sales: Regulated (1,574 ) (1,623 ) (4,640 ) (4,521 ) Non-Regulated
(1,347 ) (1,231 ) (3,980 ) (3,750 ) Total cost of sales (2,921 )
(2,854 ) (8,620 ) (8,271 ) Operating margin 711 688
1,974 1,771 General and administrative expenses (52 )
(40 ) (155 ) (135 ) Interest expense (353 ) (354 ) (1,034 ) (1,086
) Interest income 101 110 291 365 Loss on extinguishment of debt
(49 ) (16 ) (44 ) (12 ) Other expense (47 ) (13 ) (95 ) (42 ) Other
income 18 18 105 43 Gain (loss) on disposal and sale of businesses
(1 ) — (49 ) 30 Asset impairment expense (2 ) (79 ) (260 ) (473 )
Foreign currency transaction gains (losses) 21 (20 ) 13
(16 ) INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND
EQUITY IN EARNINGS OF AFFILIATES 347 294 746 445 Income tax expense
(110 ) (75 ) (270 ) (165 ) Net equity in earnings of affiliates 24
11 33 25 INCOME FROM CONTINUING
OPERATIONS 261 230 509 305 Loss from operations of discontinued
businesses, net of income tax benefit of $4 for the nine months
ended September 30, 2016 — (1 ) — (7 ) Net loss from disposal and
impairments of discontinued businesses, net of income tax benefit
of $401 for the nine months ended September 30, 2016 — —
— (382 ) NET INCOME (LOSS) 261 229 509 (84 ) Less:
Net income attributable to noncontrolling interests and redeemable
stock of subsidiaries (109 ) (54 ) (328 ) (97 ) NET INCOME (LOSS)
ATTRIBUTABLE TO THE AES CORPORATION $ 152 $ 175 $ 181
$ (181 ) AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION COMMON
STOCKHOLDERS: Income from continuing operations, net of tax $ 152 $
176 $ 181 $ 208 Loss from discontinued operations, net of tax —
(1 ) — (389 ) NET INCOME (LOSS) ATTRIBUTABLE TO THE
AES CORPORATION $ 152 $ 175 $ 181 $ (181 )
BASIC EARNINGS PER SHARE: Income from continuing operations
attributable to The AES Corporation common stockholders, net of tax
$ 0.23 $ 0.26 $ 0.28 $ 0.31 Loss from discontinued operations
attributable to The AES Corporation common stockholders, net of tax
— — — (0.59 ) NET INCOME (LOSS) ATTRIBUTABLE
TO THE AES CORPORATION COMMON STOCKHOLDERS $ 0.23 $ 0.26
$ 0.28 $ (0.28 ) DILUTED EARNINGS PER SHARE: Income
from continuing operations attributable to The AES Corporation
common stockholders, net of tax $ 0.23 $ 0.26 $ 0.27 $ 0.31 Loss
from discontinued operations attributable to The AES Corporation
common stockholders, net of tax — — — (0.59 )
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION COMMON
STOCKHOLDERS $ 0.23 $ 0.26 $ 0.27 $ (0.28 )
DILUTED SHARES OUTSTANDING 663 662 662 662
DIVIDENDS DECLARED PER COMMON SHARE $ 0.12 $ 0.11
$ 0.24 $ 0.22
THE AES
CORPORATION Strategic Business Unit (SBU) Information
(Unaudited) Three Months
Ended September 30, Nine Months Ended
September 30, (in millions) 2017 2016
2017 2016 REVENUE US $ 852 $ 916 $ 2,445 $
2,582 Andes 689 667 1,979 1,864 Brazil 1,085 1,027 3,106 2,761 MCAC
630 547 1,851 1,596 Eurasia 380 386 1,204 1,249 Corporate, Other
and Inter-SBU eliminations (4 ) (1 ) 9 (10 ) Total Revenue $
3,632 $ 3,542 $ 10,594 $ 10,042
THE AES CORPORATION Condensed Consolidated Balance
Sheets (Unaudited) September 30, December
31, 2017 2016
(in millions, except shareand
per share data)
ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,398 $
1,305 Restricted cash 437 278 Short-term investments 563 798
Accounts receivable, net of allowance for doubtful accounts of $90
and $111, respectively 2,357 2,166 Inventory 660 630 Prepaid
expenses 89 83 Other current assets 1,080 1,151 Current assets of
held-for-sale businesses 76 — Total current assets
6,660 6,411 NONCURRENT ASSETS Property, Plant and
Equipment: Land 798 779 Electric generation, distribution assets
and other 29,916 28,539 Accumulated depreciation (10,199 ) (9,528 )
Construction in progress 3,841 3,057 Property, plant
and equipment, net 24,356 22,847 Other Assets:
Investments in and advances to affiliates 1,164 621 Debt service
reserves and other deposits 786 593 Goodwill 1,157 1,157 Other
intangible assets, net of accumulated amortization of $563 and
$519, respectively 474 359 Deferred income taxes 760 781 Service
concession assets, net of accumulated amortization of $182 and
$114, respectively 1,382 1,445 Other noncurrent assets 2,095
1,905 Total other assets 7,818 6,861 TOTAL
ASSETS $ 38,834 $ 36,119
LIABILITIES AND
EQUITY CURRENT LIABILITIES Accounts payable $ 2,091 $ 1,656
Accrued interest 353 247 Accrued and other liabilities 2,020 2,066
Non-recourse debt, includes $439 and $273, respectively, related to
variable interest entities 2,257 1,303 Current liabilities of
held-for-sale businesses 15 — Total current
liabilities 6,736 5,272 NONCURRENT LIABILITIES
Recourse debt 4,954 4,671 Non-recourse debt, includes $1,305 and
$1,502, respectively, related to variable interest entities 14,822
14,489 Deferred income taxes 742 804 Pension and other
postretirement liabilities 1,387 1,396 Other noncurrent liabilities
3,047 3,005 Total noncurrent liabilities 24,952
24,365 Commitments and Contingencies (see Note 8)
Redeemable stock of subsidiaries 967 782 EQUITY THE AES CORPORATION
STOCKHOLDERS’ EQUITY Common stock ($0.01 par value, 1,200,000,000
shares authorized; 816,312,913 issued and 660,386,566 outstanding
at September 30, 2017 and 816,061,123 issued and 659,182,232
outstanding at December 31, 2016) 8 8 Additional paid-in capital
8,670 8,592 Accumulated deficit (934 ) (1,146 ) Accumulated other
comprehensive loss (2,666 ) (2,756 ) Treasury stock, at cost
(155,926,347 and 156,878,891 shares at September 30, 2017 and
December 31, 2016, respectively) (1,892 ) (1,904 ) Total AES
Corporation stockholders’ equity 3,186 2,794 NONCONTROLLING
INTERESTS 2,993 2,906 Total equity 6,179 5,700
TOTAL LIABILITIES AND EQUITY $ 38,834 $ 36,119
THE AES CORPORATION Condensed Consolidated
Statements of Cash Flows (Unaudited)
Three Months EndedSeptember
30,
Nine Months Ended September 30, 2017
2016 2017 2016 (in millions)
(in millions) OPERATING ACTIVITIES: Net income (loss) $ 261
$ 229 $ 509 $ (84 ) Adjustments to net income (loss): Depreciation
and amortization 303 291 884 877 Loss (gain) on sales and disposals
of businesses 1 — 49 (30 ) Impairment expenses 2 79 260 475
Deferred income taxes 15 (32 ) (3 ) (475 ) Provisions for
contingencies 7 7 30 28 Loss on extinguishment of debt 49 16 44 12
Loss on sales of assets 15 12 34 26 Impairments of discontinued
operations — — — 783 Other (33 ) 27 61 106 Changes in operating
assets and liabilities (Increase) decrease in accounts receivable
(159 ) (31 ) (279 ) 335 (Increase) decrease in inventory (23 ) 24
(66 ) 36 (Increase) decrease in prepaid expenses and other current
assets (16 ) 197 140 670 (Increase) decrease in other assets (111 )
(65 ) (266 ) (237 ) Increase (decrease) in accounts payable and
other current liabilities 296 (10 ) 162 (567 ) Increase (decrease)
in income tax payables, net and other tax payables 57 (15 ) (4 )
(270 ) Increase (decrease) in other liabilities 71 90
134 497 Net cash provided by operating activities 735
819 1,689 2,182 INVESTING ACTIVITIES:
Capital expenditures (464 ) (515 ) (1,587 ) (1,770 ) Acquisitions
of businesses, net of cash acquired, and equity method investments
(604 ) (50 ) (606 ) (61 ) Proceeds from the sale of businesses, net
of cash sold, and equity method investments 6 1 39 157 Sale of
short-term investments 1,012 985 2,942 3,747 Purchase of short-term
investments (797 ) (991 ) (2,673 ) (3,797 ) Increase in restricted
cash, debt service reserves. and other assets (299 ) 19 (311 ) (123
) Other investing (28 ) 8 (86 ) (22 ) Net cash used in
investing activities (1,174 ) (543 ) (2,282 ) (1,869 ) FINANCING
ACTIVITIES: Borrowings under the revolving credit facilities 951
415 1,489 1,079 Repayments under the revolving credit facilities
(327 ) (175 ) (851 ) (856 ) Issuance of recourse debt 500 — 1,025
500 Repayments of recourse debt (493 ) (197 ) (1,353 ) (808 )
Issuance of non-recourse debt 871 584 2,703 2,118 Repayments of
non-recourse debt (749 ) (666 ) (1,731 ) (1,720 ) Payments for
financing fees (16 ) (31 ) (96 ) (86 ) Distributions to
noncontrolling interests (79 ) (120 ) (263 ) (356 ) Contributions
from noncontrolling interests and redeemable security holders 15 60
59 154 Proceeds from the sale of redeemable stock of subsidiaries —
— — 134 Dividends paid on AES common stock (80 ) (73 ) (238 ) (218
) Payments for financed capital expenditures (39 ) (21 ) (100 )
(108 ) Purchase of treasury stock — — — (79 ) Proceeds from sales
to noncontrolling interests 60 — 60 — Other financing — 9
(26 ) (12 ) Net cash provided by (used in) financing
activities 614 (215 ) 678 (258 ) Effect of exchange
rate changes on cash 3 (1 ) 9 7 (Increase) decrease in cash of
discontinued operations and held-for-sale businesses 7 —
(1 ) 6 Total increase in cash and cash equivalents
185 60 93 68 Cash and cash equivalents, beginning 1,213
1,265 1,305 1,257 Cash and cash equivalents,
ending $ 1,398 $ 1,325 $ 1,398 $ 1,325
SUPPLEMENTAL DISCLOSURES: Cash payments for interest, net of
amounts capitalized $ 185 $ 222 $ 797 $ 837 Cash payments for
income taxes, net of refunds $ 73 $ 78 $ 291 $ 425 SCHEDULE OF
NONCASH INVESTING AND FINANCING ACTIVITIES: Assets acquired through
capital lease and other liabilities $ — $ — $ — $ 5
Reclassification of Alto Maipo loans and accounts payable into
equity $ — $ — $ 279 $ —
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 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 and associated
benefits and costs due to 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, and (e) gains, losses and 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 and associated benefits and
costs due to 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,
and (e) gains, losses and 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.
For the year beginning January 1, 2017, the Company changed the
definition of adjusted PTC and adjusted EPS to exclude associated
benefits and costs due to acquisitions, dispositions, and early
plant closures; including the tax impact of decisions made at the
time of sale to repatriate sales proceeds. We believe excluding
these benefits and costs better reflect the business performance by
removing the variability caused by strategic decisions to dispose
or acquire business interests or close plants early. The Company
has also reflected these changes in the comparative period.
Three Months EndedSeptember 30,
2017
Three Months EndedSeptember 30,
2016
Nine Months EndedSeptember 30,
2017
Nine Months EndedSeptember 30,
2016
Net ofNCI(12)
Per Share(Diluted) Netof NCI(12)
Net ofNCI(12)
PerShare (Diluted)Netof NCI(12)
Net ofNCI(12)
Per Share(Diluted) Netof NCI(12)
Net ofNCI(12)
Per Share(Diluted) Netof NCI(12)
(in millions, except per share amounts) Income from
Continuing Operations, Net of Tax, Attributable to AES and Diluted
EPS $ 152 $ 0.23 $
176 $ 0.26 $ 181 $
0.27 $ 208 $ 0.31 Add: Income
Tax Expense from Continuing Operations Attributable to AES 71
47 144 66 Pre-Tax Contribution
$
223 $ 223 $ 325 $
274 Adjustments Unrealized Derivative Losses (Gains)
$ (8 ) $ (0.01 ) $ 5 $ — $ (7 ) $ (0.01 ) $ 1 $ — Unrealized
Foreign Currency Transaction Losses (Gains) (21 ) (0.03 ) 3 0.01
(54 ) (0.07 ) 12 0.01 Disposition/Acquisition Losses (Gains) 1 — (3
) — 107 0.16 (1) (5 ) — (2) Impairment Expense 2 — 24 0.03 (3) 264
0.40 (4) 309 0.47 (5) Losses on Extinguishment of Debt 48 0.07 (6)
20 0.04 (7) 43 0.06 (8) 26 0.05 (9) Less: Net Income Tax Benefit
(0.02 ) (10) (0.02 ) (0.15 ) (11) (0.20
) (11)
Adjusted PTC and Adjusted EPS $ 245
$ 0.24 $ 272
$ 0.32 $ 678 $
0.66 $ 617 $ 0.64
_____________________________ (1) Amount primarily
relates to loss on sale of Kazakhstan CHPs of $48 million, or $0.07
per share, realized derivative losses associated with the sale of
Sul of $38 million, or $0.06 per share; costs associated with early
plant closure of DPL of $20 million, or $0.03 per share. (2) Net
impact of zero 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. (3) Amount primarily
relates to the asset impairment at Buffalo Gap I of $78 million
($23 million, or $0.03 per share, net of NCI). (4) Amount primarily
relates to asset impairment at Kazakhstan hydroelectric plants of
$92 million, or $0.14 per share, at Kazakhstan CHPs of $94 million,
or $0.14 per share, and DPL of $66 million, or $0.10 per share. (5)
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). (6)
Amount primarily relates to the losses on early retirement of debt
at the Parent Company of $38 million, or $0.06 per share (7) 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. (8)
Amount primarily relates to losses on
early retirement of debt at the Parent Company of $92 million, or
$0.14 per share, partially offset by the gain on early retirement
of debt at Alicura of $65 million, or $0.10 per share.
(9) 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. (10)
Amount primarily relates to the income tax benefit associated with
losses on early retirement of debt of $16 million, or $0.02 per
share in the three months ended September 30, 2017. (11) Amount
primarily relates to the income tax benefit associated with asset
impairment losses of $82 million, or $0.12 per share and $123
million, or $0.19 per share in the nine months ended September 30,
2017 and 2016, respectively. (12) NCI is defined as Noncontrolling
Interests
THE AES CORPORATION
NON-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.
The Company's non-GAAP metrics are Consolidated Free Cash Flow,
Adjusted Pretax 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.
Consolidated Free Cash Flow (“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
expenditures), net of reinsurance proceeds from third
parties. The company also excludes environmental capital
expenditures that are expected to be recovered through regulatory,
contractual or other mechanisms.
The GAAP measure most comparable to Free Cash Flow is net cash
provided by operating activities. We believe that Free Cash Flow is
a useful measure for evaluating our financial condition because it
represents the amount of cash generated by the business after the
funding of maintenance capital expenditures that may be available
for investing in growth opportunities or for repaying debt.
Three Months Ended Nine Months Ended
September 30, September 30, 2017
2016 2017 2016 (in millions)
Reconciliation of Total Capital Expenditures for Free Cash Flow
Calculation Below: Maintenance Capital Expenditures $ 140 $ 144
$ 434 $ 464 Environmental Capital Expenditures 18 43 57 198 Growth
Capital Expenditures 345 349 1,196 1,216
Total Capital Expenditures $ 503
$ 536 $ 1,687 $
1,878
Reconciliation of Free Cash Flow
Consolidated Operating Cash Flow $ 735 $ 819 $ 1,689 $ 2,182 Add:
Capital Expenditures Related to Service Concession Assets (1) 3 1 5
27 Less: Maintenance Capital Expenditures, net of reinsurance
proceeds (129 ) (144 ) (423 ) (464 ) Less: Non-Recoverable
Environmental Capital Expenditures (2) (8 ) (11 ) (18 ) (36 )
Free Cash Flow $ 601 $
665 $ 1,253 $
1,709 (1) Service concession asset
expenditures are included in net cash provided by operating
activities, but are excluded from the free cash flow non-GAAP
metric. (2) Excludes IPALCO’s recoverable environmental capital
expenditures of $10 million and $32 million for the three months
ended September 30, 2017 and September 30, 2016, respectively, as
well as, $39 million and $162 million for the nine months ended
September 30, 2017 and 2016 respectively.
The AES
Corporation Parent Financial Information
Parent only data:
last four quarters (in millions)
4 Quarters Ended September 30, June 30,
March 31, December 31, 2017 2017
2017 2016
Total subsidiary
distributions & returns of capital to Parent
Actual Actual Actual
Actual Subsidiary distributions (1) to Parent & QHCs $
1,170 $ 1,274 $ 1,236 $ 1,112 Returns of capital distributions to
Parent & QHCs 80 82 30
46
Total subsidiary distributions & returns of
capital to Parent $ 1,250 $
1,356 $ 1,266
$ 1,158 Parent only data: quarterly (in
millions)
Quarter Ended September 30, June 30,
March 31, December 31, 2017 2017
2017 2016
Total subsidiary
distributions & returns of capital to Parent
Actual Actual Actual
Actual Subsidiary distributions (1) to Parent & QHCs $
160 $ 375 $ 209 $ 426 Returns of capital distributions to Parent
& QHCs 2 66 0 12
Total subsidiary distributions & returns of capital to
Parent $ 162 $ 441
$ 209 $ 438
Parent Company
Liquidity (2)
(in millions)
Balance at September 30, June
30, March 31, December 31, 2017
2017 2017 2016 Actual
Actual Actual Actual Cash at
Parent & Cash at QHCs (3) $ 81 $ 127 $ 52 $ 100 Availability
under credit facilities 551 1,093 667
794
Ending liquidity $ 632
$ 1,220 $
719 $ 894 (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 CORPORATION 2016 FINANCIAL GUIDANCE
ELEMENTS(1) 2016 Financial Guidance As of
11/4/16 Income Statement Guidance Adjusted Earnings Per
Share 2 $0.95-$1.05
Cash Flow Guidance Consolidated Net Cash
Provided by Operating Activities $2,000-$2,900 million
Reconciliation of Free Cash Flow Guidance Consolidated Net
Cash Provided by Operating Activities $2,000-$2,900 million Less:
Maintenance Capital Expenditures $600-$800 million Free Cash Flow 3
$1,300-$2,200 million 1 2016 Guidance is based on
expectations for future foreign exchange rates and commodity prices
as of September 30, 2016. 2 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.
3 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 generated by the business after the
funding of maintenance capital expenditures that may be available
for investing in growth opportunities or for repaying debt. Free
cash flow should not be construed as an alternative to net cash
from operating activities, which is determined in accordance with
GAAP.
THE AES CORPORATION 2017 FINANCIAL GUIDANCE
ELEMENTS(1) 2017 Financial Guidance As of
11/2/17 Income Statement Guidance Adjusted Earnings Per
Share 2 $1.00-$1.10
Cash Flow Guidance Consolidated Net Cash
Provided by Operating Activities $2,000-$2,800 million Consolidated
Free Cash Flow 3 $1,400-$2,000 million
Reconciliation of Free
Cash Flow Guidance Consolidated Net Cash from Operating
Activities $2,000-$2,800 million Less: Maintenance Capital
Expenditures $600-$800 million Consolidated Free Cash Flow 3
$1,400-$2,000 million 1 2017 Guidance is based on
expectations for future foreign exchange rates and commodity prices
as of September 30, 2017. 2 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 and associated benefits and costs due to
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, and (e) gains,
losses and 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. 3 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 generated by the
business after the funding of maintenance capital expenditures that
may be available for investing in growth opportunities or for
repaying debt. Free cash flow should not be construed as an
alternative to net cash from operating activities, which is
determined in accordance with GAAP.
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version on businesswire.com: http://www.businesswire.com/news/home/20171102005378/en/
The AES CorporationInvestor Contact:Ahmed Pasha,
703-682-6451orMedia Contact:Amy Ackerman, 703-682-6399
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