Highlights
- Second quarter 2016 Diluted EPS of
($0.16) and Adjusted EPS of $0.17
- Reaffirming 2016 guidance and 2017-2018
expectations
- Prepaid an additional $181 million in
Parent debt, bringing total year-to-date prepayment to $306 million
and refinanced $500 million in near-term Parent debt
- Announced the sale of Sul in Brazil for
BRL 1,698 million (equivalent to approximately $470 million) in
proceeds to AES
- Completed 2,414 MW of projects under
construction
- Total of 3,921 MW currently under
construction and expected to come on-line through 2019
- Broke ground on the Colon project in
Panama, including a 380 MW CCGT plant and 180,000 m3 LNG
regasification and storage facility
The AES Corporation (NYSE: AES) today reported Consolidated Net
Cash Provided by Operating Activities for the second quarter of
2016 of $723 million, an increase of $570 million, primarily driven
by the collection of overdue receivables at Maritza in Bulgaria, as
well as favorable working capital in Brazil, partially offset by
lower margins. Second quarter 2016 Proportional Free Cash Flow (a
non-GAAP financial measure) increased $355 million to $417 million,
primarily due to the same factors as Consolidated Net Cash Provided
by Operating Activities.
Second quarter 2016 Diluted Earnings Per Share from Continuing
Operations (Diluted EPS) was ($0.16), a decrease of $0.27 from
second quarter 2015. Diluted EPS reflects the $0.25 impact from
higher impairment expenses related to certain generating units at
DPL in the United States, as well as the impact of lower margins.
Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial
measure) decreased $0.09 to $0.17, primarily due to lower margins.
The decline in margins was due to lower contributions from the
Company's Strategic Business Units (SBUs), primarily Brazil and
Mexico, Central America and Caribbean (MCAC), and the devaluation
of foreign currencies. In Brazil, lower margins reflect the impact
of the liability reversal taken in the second quarter of 2015,
which benefited margins in that quarter. In MCAC, lower margins
were primarily driven by lower gas sales in the Dominican Republic
and lower availability.
"During the first half of this year we made significant progress
on our strategic and financial objectives. To focus our efforts on
our most important growth areas, we announced the sale of one of
our distribution companies, AES Sul, in Brazil for approximately
$470 million. At the same time, we continued to advance attractive
platform expansion projects offering long-term, U.S.
Dollar-denominated contracts. To that end, we brought on-line 2.4
GW of projects, primarily in the U.S., on time and on budget, and
broke ground on the Colon LNG regasification terminal and gas-fired
power plant in Panama," said Andrés Gluski, AES President and Chief
Executive Officer. "The combination of completing the remaining 3.9
GW of projects still under construction and our $150 million,
three-year cost savings and revenue enhancement initiative, will
allow us to deliver our expected growth of at least 10% in
Proportional and Parent Free Cash Flow through 2018."
"Our year-to-date cash flow and earnings results keep us on
track to achieve our full year guidance," said Tom O'Flynn, AES
Executive Vice President and Chief Financial Officer. "To
strengthen our capital structure, we have prepaid a total of $306
million in Parent debt, exceeding our full year target for debt
paydown by 50% and refinanced $500 million of near-term Parent debt
maturities. As a result of these actions and our expected growth in
free cash flow, we expect to achieve strong BB credit stats by
2018."
Table 1: Key Financial Results
SecondQuarter
Year-to-DateJune 30,
Full Year 2016Guidance
$ in Millions, Except Per Share Amounts
2016
2015 2016 2015
Consolidated Net Cash Provided by Operating Activities $ 723
$ 153 $ 1,363 $ 590 $2,000-$2,900 Proportional Free
Cash Flow1 $ 417 $ 62 $ 670 $ 327 $1,000-$1,350 Diluted EPS from
Continuing Operations $ (0.16 ) $ 0.11 $ 0.05 $ 0.33 N/A Adjusted
EPS1 $ 0.17 $ 0.26 $ 0.32
$ 0.52 $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
Reaffirming
2017-2018Expectations
Consolidated Net Cash Provided by Operating Activities
$2,000-$2,900 N/A Proportional Free Cash Flow1 $1,000-$1,350
At least 10% average annualgrowth off 2016
base
Adjusted EPS1,2 $0.95-$1.05
Expect higher end of 12%-16%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 gains related to derivative
transactions, estimated to be $3 million; (b) unrealized foreign
currency losses, estimated to be $7 million; (c) losses due to
dispositions and acquisitions of business interests, estimated to
be $6 million; (d) losses due to impairments, estimated to be $163
million, related to DP&L and Buffalo Gap 2; and (e) costs due
to the early retirement of debt, estimated to be $5 million. The
amounts set forth above are as of June 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's 2016 guidance and
2017-2018 expectations are based on foreign currency and commodity
forward curves as of June 30, 2016.
- 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.
- As disclosed in May 2016, the Company
continues to expect stronger second half 2016 Adjusted EPS results,
partly due to a lower adjusted effective tax rate and fewer planned
outages at certain businesses.
- The Company is reaffirming its growth
rate expectations for 2017-2018 for both Proportional Free Cash
Flow and Adjusted EPS.
Additional Highlights
- In the second quarter of 2016, DPL in
the United States recorded a $235 million, or $0.25 per share,
asset impairment charge largely related to the Killen generating
station. The charge is attributable to lower expectations of future
capacity revenue, resulting from the most recent PJM capacity
auction for 2018-2019 and revised estimates of future environmental
compliance related to the Environmental Protection Agency's
Effluent Limitation Guidelines (ELG) and Coal Combustion Residuals
(CCR) costs.
- 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
completed 2,414 MW of projects:
- 1,713 MW of MATS upgrades, the 630 MW
Harding Street Units 5-7 gas-fired conversion and the 20 MW Harding
Street Energy Storage Array at Indianapolis Power & Light in
Indiana;
- 21 MW Andes Solar plant at Gener in
Chile;
- 20 MW Tunjita hydroelectric plant in
Colombia; and
- 10 MW Warrior Run Energy Storage Array
in Maryland.
- The Company currently has 3,921 MW of
capacity currently under construction and expected to come on-line
through 2019.
- In May 2016, the Company broke ground
on the Colon project in Panama, consisting of a 380 MW CCGT plant
and 180,000 m3 LNG regasification and storage facility. The CCGT
plant is contracted under a 10-year, U.S. Dollar-denominated Power
Purchase Agreement and is expected to come on-line in the first
half of 2018. The LNG facility is expected to come on-line in
2019.
- Year-to-Date 2016, the Company has
announced or closed approximately $540 million in asset sale
proceeds to AES.
- In June 2016, the Company announced the
sale of its 100% equity interest in AES Sul, one of its utilities
in Brazil, for BRL 1,698 million (equivalent to approximately $470
million) in proceeds to AES. The Company expects this transaction
to close in the second half of 2016.
- 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, Consolidated Balance
Sheets, Segment Information, 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, August 5, 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 9769530.
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 CORPORATION
Condensed Consolidated Statements of
Operations (Unaudited)
Three Months Ended June 30,
Six Months Ended June 30, 2016
2015 2016 2015 (in millions, except
per share amounts) Revenue: Regulated $ 1,565 $ 1,794 $ 3,141 $
3,628 Non-Regulated 1,664 1,862 3,359 3,786
Total revenue 3,229 3,656 6,500 7,414
Cost of Sales: Regulated (1,431 ) (1,432 ) (2,898 ) (2,989 )
Non-Regulated (1,224 ) (1,469 ) (2,519 ) (2,949 ) Total cost of
sales (2,655 ) (2,901 ) (5,417 ) (5,938 ) Operating margin 574
755 1,083 1,476 General and
administrative expenses (47 ) (50 ) (95 ) (105 ) Interest expense
(390 ) (287 ) (732 ) (630 ) Interest income 138 116 255 195 Gain
(loss) on extinguishment of debt — (117 ) 4 (141 ) Other expense
(21 ) (12 ) (29 ) (29 ) Other income 12 15 25 30 Gain (loss) on
disposal and sale of businesses (17 ) — 30 — Asset impairment
expense (235 ) (37 ) (394 ) (45 ) Foreign currency transaction
gains (losses) (36 ) 13 4 (8 ) INCOME (LOSS) FROM
CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF
AFFILIATES (22 ) 396 151 743 Income tax benefit (expense) 7 (123 )
(90 ) (223 ) Net equity in earnings of affiliates 7 1
14 15 INCOME (LOSS) FROM CONTINUING OPERATIONS (8 )
274 75 535 Income (loss) from operations of discontinued
businesses, net of income tax (expense) benefit of $(1), $3, $3 and
$7, respectively 3 (10 ) (6 ) (17 ) Net loss from disposal and
impairments of discontinued businesses, net of income tax benefit
of $401, $0, $401 and $0, respectively (382 ) — (382 ) —
NET INCOME (LOSS) (387 ) 264 (313 ) 518 Less: Net income
attributable to noncontrolling interests (95 ) (195 ) (43 ) (307 )
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ (482 ) $ 69
$ (356 ) $ 211 AMOUNTS ATTRIBUTABLE TO THE AES
CORPORATION COMMON STOCKHOLDERS: Income (loss) from continuing
operations, net of tax $ (103 ) $ 79 $ 32 $ 228 Loss from
discontinued operations, net of tax (379 ) (10 ) (388 ) (17 ) NET
INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION $ (482 ) $ 69
$ (356 ) $ 211 BASIC EARNINGS PER SHARE: Income
(loss) from continuing operations attributable to The AES
Corporation common stockholders, net of tax $ (0.16 ) $ 0.11 $ 0.05
$ 0.33 Loss from discontinued operations attributable to The AES
Corporation common stockholders, net of tax (0.57 ) (0.01 ) (0.59 )
(0.03 ) NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION
COMMON STOCKHOLDERS $ (0.73 ) $ 0.10 $ (0.54 ) $ 0.30
DILUTED EARNINGS PER SHARE: Income (loss) from continuing
operations attributable to The AES Corporation common stockholders,
net of tax $ (0.16 ) $ 0.11 $ 0.05 $ 0.33 Loss from discontinued
operations attributable to The AES Corporation common stockholders,
net of tax (0.57 ) (0.01 ) (0.59 ) (0.03 ) NET INCOME (LOSS)
ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS $ (0.73 ) $
0.10 $ (0.54 ) $ 0.30 DILUTED SHARES OUTSTANDING 659
695 662 701 DIVIDENDS DECLARED PER
COMMON SHARE $ — $ 0.10 $ 0.11 $ 0.10
THE AES CORPORATION Strategic Business Unit
(SBU) Information (Unaudited) Three
Months Ended June 30, Six Months Ended
June 30, (in millions) 2016 2015
2016 2015 REVENUE US $
811 $ 831 $ 1,666 $ 1,828 Andes 575 630 1,197 1,242 Brazil 895
1,113 1,734 2,217 MCAC 530 601 1,049 1,199 Europe 222 299 468 629
Asia 201 187 395 306 Corporate, Other and Inter-SBU eliminations (5
) (5 ) (9 ) (7 ) Total Revenue $ 3,229 $ 3,656
$ 6,500 $ 7,414
THE AES CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
June 30,2016
December 31,2015
(in millions, except shareand
per share data)
ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,265 $
1,257 Restricted cash 250 295 Short-term investments 544 469
Accounts receivable, net of allowance for doubtful accounts of $108
and $87 respectively 2,087 2,302 Inventory (see Note 2) 655 671
Prepaid expenses 91 106 Other current assets 1,441 1,318 Current
assets of discontinued operations and held-for-sale businesses
1,048 424 Total current assets 7,381 6,842
NONCURRENT ASSETS Property, Plant and Equipment: Land 785
702 Electric generation, distribution assets and other 28,416
27,751 Accumulated depreciation (9,705 ) (9,327 ) Construction in
progress 3,539 3,029 Property, plant and equipment,
net 23,035 22,155 Other Assets: Investments in and
advances to affiliates (see Note 6) 615 610 Debt service reserves
and other deposits 700 555 Goodwill 1,157 1,157 Other intangible
assets, net of accumulated amortization of $97 and $93,
respectively 219 207 Deferred income taxes 483 410 Service
concession assets, net of accumulated amortization of $71 and $34,
respectively 1,486 1,543 Other noncurrent assets 1,898 2,109
Noncurrent assets of discontinued operations and held-for-sale
businesses — 882 Total other assets 6,558
7,473 TOTAL ASSETS $ 36,974 $ 36,470
LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable
$ 1,434 $ 1,571 Accrued interest 249 236 Accrued and other
liabilities 2,082 2,286 Non-recourse debt, including $190 and $258,
respectively, related to variable interest entities (see Note 7)
1,610 2,172 Current liabilities of discontinued operations and
held-for-sale businesses 841 661 Total current
liabilities 6,216 6,926 NONCURRENT LIABILITIES
Recourse debt (see Note 7) 4,909 4,966 Non-recourse debt, including
$1,059 and $1,531, respectively, related to variable interest
entities (see Note 7) 14,261 12,943 Deferred income taxes 1,036
1,090 Pension and other post-retirement liabilities (see Note 9)
1,054 919 Other noncurrent liabilities 3,072 2,794 Noncurrent
liabilities of discontinued operations and held-for-sale businesses
— 123 Total noncurrent liabilities 24,332
22,835 Commitments and Contingencies (see Note 8) Redeemable
stock of subsidiaries 753 538 EQUITY (see Note 10) THE AES
CORPORATION STOCKHOLDERS’ EQUITY Common stock ($0.01 par value,
1,200,000,000 shares authorized; 815,894,592 issued and 659,001,121
outstanding at June 30, 2016 and 815,846,621 issued and 666,808,790
outstanding at December 31, 2015) 8 8 Additional paid-in capital
8,714 8,718 Retained earnings (accumulated deficit) (284 ) 143
Accumulated other comprehensive loss (3,768 ) (3,883 ) Treasury
stock, at cost (156,893,471 shares at June 30, 2016 and 149,037,831
at December 31, 2015) (1,904 ) (1,837 ) Total AES Corporation
stockholders’ equity 2,766 3,149 NONCONTROLLING INTERESTS 2,907
3,022 Total equity 5,673 6,171 TOTAL
LIABILITIES AND EQUITY $ 36,974 $ 36,470
THE AES CORPORATION
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
Six Months Ended June 30, 2016
2015 OPERATING ACTIVITIES: Net income (loss) $
(313 ) $ 518 Adjustments to net income: Depreciation and
amortization 586 597 Gain on sales and disposals of businesses (30
) — Impairment expenses 396 45 Deferred income taxes (443 ) 17
Provisions for (reversals of) contingencies 21 (134 ) (Gain) loss
on extinguishment of debt (4 ) 145 Loss on sales of assets 14 12
Impairments of discontinued operations and held-for-sale businesses
783 — Other 79 70 Changes in operating assets and liabilities
(Increase) decrease in accounts receivable 366 (444 ) (Increase)
decrease in inventory 12 (54 ) (Increase) decrease in prepaid
expenses and other current assets 473 132 (Increase) decrease in
other assets (172 ) (815 ) Increase (decrease) in accounts payable
and other current liabilities (557 ) 179 Increase (decrease) in
income tax payables, net and other tax payables (255 ) (131 )
Increase (decrease) in other liabilities 407 453 Net
cash provided by operating activities 1,363 590
INVESTING ACTIVITIES: Capital Expenditures (1,255 ) (1,168 )
Acquisitions, net of cash acquired (11 ) (18 ) Proceeds from the
sale of businesses, net of cash sold 156 2 Sale of short-term
investments 2,762 2,460 Purchase of short-term investments (2,806 )
(2,270 ) Increase in restricted cash, debt service reserves and
other assets (142 ) (51 ) Other investing (30 ) (25 ) Net cash used
in investing activities (1,326 ) (1,070 ) FINANCING ACTIVITIES:
Borrowings under the revolving credit facilities 664 361 Repayments
under the revolving credit facilities (681 ) (359 ) Issuance of
recourse debt 500 575 Repayments of recourse debt (611 ) (915 )
Issuance of non-recourse debt 1,534 1,940 Repayments of
non-recourse debt (1,054 ) (1,457 ) Payments for financing fees (55
) (40 ) Distributions to noncontrolling interests (236 ) (113 )
Contributions from noncontrolling interests 94 97 Proceeds from the
sale of redeemable stock of subsidiaries 134 461 Dividends paid on
AES common stock (145 ) (141 ) Payments for financed capital
expenditures (87 ) (84 ) Purchase of treasury stock (79 ) (307 )
Other financing (21 ) (29 ) Net cash used in financing activities
(43 ) (11 ) Effect of exchange rate changes on cash 8 (19 )
Decrease in cash of discontinued operations and held-for-sale
businesses 6 12 Total increase (decrease) in cash and
cash equivalents 8 (498 ) Cash and cash equivalents, beginning
1,257 1,517 Cash and cash equivalents, ending $ 1,265
$ 1,019 SUPPLEMENTAL DISCLOSURES: Cash payments for
interest, net of amounts capitalized $ 615 $ 665 Cash payments for
income taxes, net of refunds $ 347 $ 247 SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES: Assets acquired through capital
lease and other liabilities $ 5 $ 10
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 from 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 EndedJune
30,
Six Months EndedJune 30, 2016
2015 2016 2015
Calculation of Maintenance Capital
Expenditures for Free Cash Flow (1) Reconciliation
Below:
Maintenance Capital Expenditures $ 158 $ 157 $ 320 $ 306
Environmental Capital Expenditures
68 82 155 130 Growth Capital Expenditures 466 352 867
816
Total Capital Expenditures $
692 $ 591 $ 1,342
$ 1,252
Reconciliation of Proportional Adjusted Operating Cash Flow
(2) Consolidated Operating Cash Flow $ 723 $ 153 $ 1,363 $
590 Add: Capital Expenditures Related to Service Concession Assets
(3) 2 51 26 71 Less: Proportional Adjustment Factor (2) (5) (185 )
(13 ) (474 ) (85 )
Proportional Adjusted Operating Cash Flow
(2) (5) $ 540 $ 191
$ 915 $ 576
Reconciliation of Free Cash Flow
(1) Consolidated Operating Cash Flow $ 723 $ 153 $ 1,363 $
590 Add: Capital Expenditures Related to Service Concession Assets
(3) 2 51 26 71 Less: Maintenance Capital Expenditures, net of
reinsurance proceeds (158 ) (157 ) (320 ) (306 ) Less:
Non-Recoverable Environmental Capital Expenditures (13 ) (17 ) (25
) (26 )
Free Cash Flow (1) $ 554
$ 30 $ 1,044 $
329
Reconciliation of
Proportional Free Cash Flow (1) (2) Proportional
Operating Cash Flow (2) $ 539 $ 165 $ 902 $ 540 Add: Proportional
Capital Expenditures Related to Service Concession Assets (3) 1
26 13 36
Proportional Adjusted
Operating Cash Flow (2) (5) 540 191
915 576 Less: Proportional Maintenance Capital
Expenditures, net of reinsurance proceeds (2)
(114
)
(117 ) (226 ) (230 ) Less: Proportional Non-Recoverable
Environmental Capital Expenditures (2) (4)
(9
)
(12 ) (19 ) (19 )
Proportional Free Cash Flow (1) (2)
$ 417 $ 62 $
670 $ 327
(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 $38 million and $47 million for the three months
ended June 30, 2016 and 2015, as well as, $94 million and $86
million for the six months ended June 30, 2016 and 2015,
respectively.
(5)
Includes proportional adjustment amount for service concession
asset expenditures of $1 million and $26 million for the three
months ended June 30, 2016 and 2015, as well as, $13 million and
$36 million for the six months ended June 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 MonthsEnded June
30,2016
Three MonthsEnded June
30,2015
Six Months EndedJune 30,
2016
Six Months EndedJune 30,
2015
Net ofNCI(1)
Per Share(Diluted) Netof NCI(1)
Net ofNCI(1)
Per Share(Diluted) Netof NCI(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 Continuing Operations Attributable to AES and Diluted EPS
$ (103 ) $ (0.16 )
$ 79 $ 0.11 $ 32 $
0.05 $ 228 $ 0.33 Add: Income
Tax Expense (Benefit) from Continuing Operations Attributable to
AES (42 ) 49 19 103 Pre-Tax Contribution
$ (145 ) $ 128 $
51 $ 331 Adjustments Unrealized
Derivative Losses/(Gains) $ 30 $ 0.04 $ (2 ) $ — $ (4 ) $ — $ (17 )
$ (0.02 ) Unrealized Foreign Currency Transaction Losses/(Gains) 17
0.02 (4 ) — 9 — 43 0.06 Disposition/Acquisition Losses/ (Gains) 17
0.03 (7) (4 ) (0.01 ) (2 ) — (8) (9 ) (0.01 ) Impairment Losses 235
0.36 (9) 30 0.04 (10) 285 0.43 (11) 36 0.05 (10) Loss on
Extinguishment of Debt 6 0.01 112 0.16 (12) 6 0.01 138 0.20 (13)
Less: Net Income Tax Benefit (2)(3)(4)(5)(6) (0.13 )
(0.04 ) (0.17 ) (0.09 )
Adjusted PTC and Adjusted
EPS $ 160 $ 0.17
$ 260 $ 0.26 $
345 $ 0.32 $ 522
$ 0.52
_____________________________
(1)
NCI is defined as Noncontrolling Interests.
(2)
The per share income tax benefit (expense) associated with
unrealized derivative (gains) losses were $0.01 and $0.00 in the
three months ended June 30, 2016 and 2015, and $0.00 and $0.00 in
the six months ended June 30, 2016 and 2015, respectively.
(3)
The per share income tax benefit (expense) associated with
unrealized foreign currency transaction (gains) losses were $0.01
and $(0.01) in the three months ended June 30, 2016 and 2015, and
of $0.00 and $0.03 in the six months ended June 30, 2016 and 2015,
respectively.
(4)
The per share income tax benefit (expense) associated with
disposition/acquisition (gains) losses were $0.00 and $0.00 in the
three months ended June 30, 2016 and 2015, and $(0.01) and $0.00 in
the six months ended June 30, 2016 and 2015, respectively.
(5)
The per share income tax benefit (expense) associated with
impairment losses were $0.11 and $0.00 in the three months ended
June 30, 2016 and 2015, and $0.18 and $0.00 in the six months ended
June 30, 2016 and 2015, respectively.
(6)
The per share income tax benefit (expense) associated with loss on
extinguishment of debt were $0.00 and $0.05 in the three months
ended June 30, 2016 and 2015, and $0.00 and $0.06 in the six months
ended June 30, 2016 and 2015, respectively.
(7)
Amount primarily relates to the loss from the deconsolidation of UK
Wind of $20 million, or $0.03 per share.
(8)
Amount primarily relates to the loss from the deconsolidation of UK
Wind of $20 million, or $0.03 per share; and the gain from the sale
of DPLER of $22 million, or $0.03 per share.
(9)
Amount primarily relates to the asset impairment at DPL of $235
million, or $0.36 per share.
(10)
Amount primarily relates to the asset impairment at UK Wind of $37
million ($30 million, or $0.04 per share, net of NCI).
(11)
Amount primarily relates to the asset impairment at DPL of $235
million,or $0.36 per share; and at Buffalo Gap II of $159 million
($49 million, or $0.07 per share, net of NCI).
(12)
Amount primarily relates to the loss on early retirement of debt at
the Parent Company of $85 million, or $0.12 per share; and at IPL
of $19 million ($15 million, or $0.02 per share, net of NCI).
(13)
Amount primarily relates to the loss on early retirement of debt at
the Parent Company of $111 million, or $0.16 per share; and at IPL
of $19 million ($15 million, or $0.02 per share, net of NCI).
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
June 30, 2016
March 31,2016
December 31,2015
September 30,2015
Actual Actual Actual
Actual Subsidiary distributions(1) to Parent & QHCs $
1,070 $ 968 $ 1,057 $ 917 Returns of capital distributions to
Parent & QHCs 30 24 8
26
Total subsidiary distributions & returns of
capital to Parent $ 1,100 $
992 $ 1,065 $ 943
Parent only data: quarterly (in millions)
Quarter
Ended
Total subsidiary
distributions & returns of capital to Parent
June 30, 2016
March 31,2016
December 31,2015
September 30,2015
Actual Actual Actual
Actual Subsidiary distributions(1) to Parent & QHCs $
337 $ 85 $ 555 $ 93 Returns of capital distributions to Parent
& QHCs 14 16 0
0
Total subsidiary distributions & returns of capital to
Parent $ 351 $ 101
$ 555 $ 93
Parent Company
Liquidity (2)
(in millions)
Balance at June 30, 2016
March 31,2016
December 31,2015
September 30,2015
Actual Actual Actual
Actual Cash at Parent & Cash at QHCs (3) $ 30 $ 17 $ 400
$ 6 Availability under credit facilities 733
658 738 625
Ending liquidity
$ 763 $ 675 $
1,138 $ 631
(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), (2)
2016 Financial Guidance As of
8/5/16 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 June 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/20160805005123/en/
The AES CorporationInvestor Contact:Ahmed Pasha,
703-682-6451orMedia Contact:Amy Ackerman, 703-682-6399
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