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AES Reports Second Quarter 2017 Financial Results; Reaffirms 2017 Guidance and Long-Term Expectations

ARLINGTON, Va.--(BUSINESS WIRE)--The AES Corporation (NYSE: AES) today reported financial results for the three months ended June 30, 2017. Compared with last year, the Company benefited from higher margins, primarily driven by higher availability at certain generation businesses, and lower Parent interest expense.

“Our second quarter results reflect our efforts to improve the efficiency of our portfolio through higher availability and our capital allocation decisions that resulted in lower Parent interest”

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Second quarter 2017 Diluted Earnings Per Share from Continuing Operations (Diluted EPS) was $0.08, an increase of $0.24 compared to the second quarter of 2016, reflecting lower impairment expense of $0.16, higher margins and lower Parent interest expense. The lower impairment expense was driven primarily by the $235 million impairment of DPL generation assets recorded in 2016. Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) for the second quarter of 2017 increased $0.08 to $0.25, primarily due to higher margins and lower Parent interest expense.

Consolidated Net Cash Provided by Operating Activities for the second quarter of 2017 was $251 million, a decrease of $472 million compared to the second quarter of 2016. The decrease was primarily driven by the receipt of overdue receivables at Maritza in Bulgaria in 2016, and the impact from the recovery of high purchased power costs at Eletropaulo in Brazil in 2016. Second quarter 2017 Consolidated Free Cash Flow (a non-GAAP financial measure) decreased $448 million to $106 million compared to the second quarter of 2016, primarily due to the same drivers as Consolidated Net Cash Provided by Operating Activities.

"In the last few months, we completed the acquisition of sPower, the largest independent solar developer and operator in U.S., brought on-line an additional 122 MW in the Dominican Republic by closing the cycle at DPP and closed on $2 billion in non-recourse financing for the 1.4 GW Southland CCGT and energy storage project in California," said Andrés Gluski, AES President and Chief Executive Officer. "These are concrete steps towards achieving our growth objectives, based on long-term, U.S. Dollar-denominated contracts, with decreased carbon intensity. Overall, we are making good progress on our 5 GW of projects under construction, with the exception of our 531 MW Alto Maipo hydroelectric project in Chile, where we are disappointed with the project's current status and continued cost overruns."

"Our second quarter results reflect our efforts to improve the efficiency of our portfolio through higher availability and our capital allocation decisions that resulted in lower Parent interest," said Tom O'Flynn, AES Executive Vice President and Chief Financial Officer. "Based on our performance year-to-date, we are reaffirming our 2017 guidance and expectations through 2020."

Table 1: Key Financial Results

Second Quarter

Year-to-Date
June 30,

Full Year 2017
Guidance

$ in Millions, Except Per Share Amounts 2017 2016 2017 2016
Diluted EPS from Continuing Operations $ 0.08 $ (0.16 ) $ 0.04 $ 0.05 N/A
Adjusted EPS 1 $ 0.25 $ 0.17 $ 0.42 $ 0.32 $1.00-$1.10
Consolidated Net Cash Provided by Operating Activities $ 251 $ 723 $ 954 $ 1,363 $2,000-$2,800
Consolidated Free Cash Flow 1 $ 106 $ 554 $ 652 $ 1,044 $1,400-$2,000

Guidance and Expectations

The Company is reaffirming its 2017 guidance and expectations through 2020.

Table 2: Guidance and Expectations

$ in Millions, Except Per Share Amounts

2016 Guidance &
Expectations

2017 Guidance 2020 Expectations
Adjusted EPS 1,2 $0.95-$1.05 $1.00-$1.10

8%-10% growth off
mid-point of 2016
guidance

Consolidated Net Cash Provided by Operating Activities $2,000-$2,900 $2,000-$2,800 N/A
Consolidated Free Cash Flow 1 $1,300-$2,200 $1,400-$2,000

8%-10% growth off
mid-point of 2016
expectation

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 June 30, 2017, the impact of these items was as follows: (a) unrealized gains or losses related to derivative transactions represent a loss of $1 million, (b) unrealized foreign currency gains or losses represent a gain of $17 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 from the repatriation of sales proceeds represent a loss of $87 million, (d) losses due to impairments of $181 million and (e) gains, losses and costs due to the early retirement of debt represent a gain of $3 million.

The Company expects 8% to 10% average annual growth in Parent Free Cash Flow (a non-GAAP financial metric) through 2020 off 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 June 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 June 2017, the Company closed $2.0 billion in non-recourse financing for its 1,384 MW Southland re-powering projects in California.
    • The Southland re-powering projects include 1,284 MW of combined cycle gas capacity and 100 MW of battery-based energy storage under 20-year contracts with Southern California Edison.
    • This is the largest ever non-recourse financing for a battery-based energy storage project.
    • The projects are under construction and the 1,284 MW of gas-fired capacity is expected to come on-line in the first half of 2020. The 100 MW of battery-based energy storage is expected to come on-line in the first half of 2021.
    • This more efficient capacity will replace AES' 3,941 MW of existing gas-fired capacity at Southland, providing clean and reliable energy to more than 1 million homes in Southern California and contributing to AES' long-term growth.
  • 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 July 2017, the Company and Alberta Investment Management Corporation (AIMCo) closed the acquisition of FTP Power LLC (sPower) for $853 million in cash, plus the assumption of $724 million in non-recourse debt. AES and AIMCo independently own slightly below 50% equity interests in sPower.
    • In July 2017, the Company announced that its Alto Maipo project under construction in Chile continued to face construction difficulties, including greater than expected costs and slower than anticipated productivity by construction contractors towards agreed-upon milestones. The Company is in discussions with non-recourse lenders and construction contractors to evaluate the path forward. On May 8, 2017, when the Company provided its 2017 guidance and expectations through 2020, the Company had already substantially reduced its expectations from Alto Maipo. Accordingly, the Company does not expect any material impact on its 2017 guidance and expectations through 2020 as a result of the continued difficulties at Alto Maipo. The Company’s ownership interest in Alto Maipo is 62%.
  • In August, the Company completed closing the cycle at its DPP power plant in the Dominican Republic, adding 122 MW of capacity.
  • The Company currently has 4,759 MW of capacity under construction and expected to come on-line through 2021.

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 Tuesday, August 8, 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 3418177. 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 19,000 people is committed to...


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