ROHSTOFF INTERNATIONAL

11:00 | 02.11.2017
AES Reports Third Quarter 2017 Financial Results; Reaffirms 2017 Guidance and Long-Term Expectations

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 CORPORATIONCondensed 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 CORPORATIONStrategic Business Unit (SBU) Information(Unaudited)

 

 

 

 

Three Months Ended September 30,
Nine Months Ended September 30,(in millions)
2017
2016
2017
2016REVENUE

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 CORPORATIONCondensed 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 CORPORATIONCondensed 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 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 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 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.

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
2016Total 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
 

 
$1,158Parent only data: quarterly

(in millions)
Quarter Ended

September 30,
June 30,
March 31,
December 31,

2017
2017
2017
2016Total 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
 

 
$438Parent 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 11/4/16Income 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 CORPORATION2017 FINANCIAL GUIDANCE ELEMENTS(1)

 

2017 Financial Guidance

As of 11/2/17Income 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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171102005378/en/


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