AES Reports First 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 March 31, 2017. Compared with last year, these results primarily reflect higher margins at the Company’s: Mexico, Central America and the Caribbean (MCAC) Strategic Business Unit (SBU), due to improved availability in Mexico; Brazil SBU, largely due to higher spot sales at Tietê; and Andes SBU, due to higher sales in Colombia. These positive contributions were partially offset by lower margins at the Company’s Europe SBU, due to the restructuring of the Power Purchase Agreement (PPA) at Maritza in Bulgaria in the second quarter of 2016.
First quarter 2017 Diluted Earnings Per Share from Continuing Operations (Diluted EPS) was ($0.04), a decrease of $0.24 compared to the first quarter of 2016, reflecting higher impairment expense of $0.18, primarily due to the sale of coal-fired merchant generating assets in Kazakhstan and the planned shutdown of certain coal-fired merchant generating plants at Dayton Power & Light (DPL) in Ohio. Diluted EPS also reflects the $0.05 of losses associated with dispositions, primarily on the sale of Sul in Brazil and the announced shutdown of certain coal-fired merchant generating plants at DPL in Ohio. Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) for the first quarter of 2017 increased $0.02 to $0.17, primarily due to higher margins and a lower adjusted effective tax rate of 41% versus 47% in 2016.
Consolidated Net Cash Provided by Operating Activities for the first quarter of 2017 was $703 million, an increase of $63 million compared to the first quarter of 2016. The increase was primarily driven by higher margins, as well as lower tax payments at AES Gener and in the Dominican Republic. First quarter 2017 Consolidated Free Cash Flow (a non-GAAP financial measure) increased $56 million to $546 million compared to the first quarter of 2016, primarily due to the same drivers as Consolidated Net Cash Provided by Operating Activities.
“During the first quarter we made meaningful progress on our objectives for 2017, including restructuring our 531 MW Alto Maipo hydroelectric project in Chile, prepaying $300 million in Parent debt and reshaping our portfolio by exiting 3.7 GW of merchant coal-fired generation in Kazakhstan and Ohio,” said Andrés Gluski, AES President and Chief Executive Officer. “We also received FERC approval for our acquisition of sPower and advanced our growth pipeline. To that end, we secured final permits for our 1.4 GW Southland repowering project in California and agreed to acquire 386 MW of wind generation in Brazil. Along with our 3.4 GW currently under construction and expected to come on-line through 2019, we expect these projects to be significant contributors to our future growth.”
“Based on our first quarter results and our future outlook, we are reaffirming our 2017 guidance for all metrics, as well as our 8% to 10% average annual growth rate through 2020,” said Tom O’Flynn, AES Executive Vice President and Chief Financial Officer. “Our strong cash flow and continued Parent debt paydown keep us on track to achieve investment grade credit statistics.”
Table 1: Key Financial Results
| First Quarter | Full Year 2017 Guidance |
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| $ in Millions, Except Per Share Amounts | 2017 | 2016 | |||||||||
| Diluted EPS from Continuing Operations | $ | (0.04 | ) | $ | 0.20 | N/A | |||||
| Adjusted EPS 1 | $ | 0.17 | $ | 0.15 | $1.00-$1.10 | ||||||
| Consolidated Net Cash Provided by Operating Activities | $ | 703 | $ | 640 | $2,000-$2,800 | ||||||
| Consolidated Free Cash Flow 1 | $ | 546 | $ | 490 | $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. | ||||||||||
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 |
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| 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 |
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| 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 March 31, 2017, the impact of these items was as follows: (a) unrealized gains or losses related to derivative transactions had no impact, (b) unrealized foreign currency gains or losses represent a gain of $6 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 $35 million (d) losses due to impairments of $117 million and (e) gains, losses and costs due to the early retirement of debt represent a gain of $11 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 March 31, 2017. The Company’s expectations through 2020 are based on foreign currency and commodity forward curves as of December 31, 2016.
Additional Highlights
- In February 2017, the Company and Alberta Investment Management Corporation (AIMCo) agreed to acquire 100% of FTP Power LLC (sPower) for $853 million in cash, plus the assumption of $724 million in non-recourse debt. In connection with this transaction, AES and AIMCo will directly and independently purchase and own slightly below 50% equity interests in sPower. A portion of the acquisition will be funded with $90 million of subordinated debt to sPower, and the remaining amount of $763 million will be funded with equity from AES and AIMCo in equal proportion.
- This transaction is expected to close by the third quarter of 2017, subject to review or approval by the Committee on Foreign Investment in the United States and the expiration or termination of any waiting period under the Hart-Scott-Rodino Act. The Federal Energy Regulatory Commission has already approved the transaction. The acquisition price is subject to customary post-signing purchase price adjustments.
- In March 2017, the Company prepaid $300 million in Parent debt, including $276 million of 7.375% Senior Notes due in 2021 and $24 million of 8.0% Senior Notes due in 2020.
- In March 2017, the Company announced its plan to shut down 1,225 MW of merchant coal-fired generation at DPL (Killen and Stuart plants), on or before June 1, 2018.
- In April 2017, the Company closed the sale of 1,743 MW of coal-fired generation in Kazakhstan for $24 million in proceeds.
- In April 2017, the Company announced the sale of its interest in 739 MW of merchant coal-fired generation at DPL in Ohio (Miami Fort and Zimmer plants) for $50 million in proceeds.
- The Company currently has 3,399 MW of capacity under construction and expected to come on-line through 2019.
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 Monday, May 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 9185589. 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.
Source:Businesswire
