AES Reports Adjusted Earnings Per Share of $0.26 for First Quarter 2013 and Reaffirms Full Year 2013

AES Reports Adjusted Earnings Per Share of $0.26 for First Quarter 2013 and Reaffirms Full Year 2013 Guidance

Recent Announcements

  • Announced the Company's dividend policy
  • Commenced senior notes offering and tender offers to reduce recourse debt and improve the AES parent credit profile by extending near-term maturities
  • Sold the Company's remaining interest in Cartagena in Spain and closed the sale of two Ukraine utilities for total equity proceeds to AES of approximately $133 million; exited operations in two countries
  • Commenced construction of the 532 MW Cochrane coal-fired facility in Chile
  • Achieved commercial operations at the 270 MW Ventanas IV coal-fired plant in Chile
  • Reaffirmed 2012-2015 total return target of 6% to 8%

ARLINGTON, Va.--(BUSINESS WIRE)-- The AES Corporation (NYS: AES) today reported Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) of $0.26 for first quarter 2013, a decline of $0.11 from first quarter 2012. The decline was driven primarily by a $0.06 one-time arbitration settlement at Cartagena in Spain recorded in first quarter 2012, the $0.03 impact of low hydrology in Latin America and unfavorable movements in foreign currency exchange rates. In addition, first quarter 2013 Diluted Earnings Per Share from Continuing Operations decreased $0.30 due in large part to a $0.14 gain on the sale of an asset recorded in first quarter 2012, which was excluded from Adjusted EPS.


"We continue to execute on our strategy to drive shareholder value by simplifying our portfolio and reducing overhead, while expanding from existing platforms in our most competitive businesses," said Andrés Gluski, AES President and Chief Executive Officer. "This quarter we closed the sale of three businesses and exited two more countries while also reducing general and administrative expenses $26 million from last year's level. In Chile, construction began this quarter on the 532 MW Cochrane project, immediately adjacent to the 545 MW Angamos power plant we commissioned last year."

"Consistent with our capital allocation plan, we are paying down debt and investing in platform expansions, such as the Cochrane project," said Tom O'Flynn, AES Executive Vice President and Chief Financial Officer. "We appreciate the confidence of the investment community, as our senior notes offering was priced at 4.875%, AES' lowest yield ever."

 

Table 1: Key Financial Results

$ in Millions, Except Per Share Amounts       First Quarter  

Full Year 2013
Guidance

        2013   2012  
Adjusted EPS1       $   0.26   $   0.37   $ 1.24-1.32
Diluted EPS from Continuing Operations       $   0.14   $   0.44     N/A
Proportional Free Cash Flow1       $   352   $   235   $ 750-1,050
Consolidated Net Cash Provided by Operating Activities       $   618   $   534   $ 2,500-3,100

1

 

A non-GAAP financial measure. See "Non-GAAP Financial Measures" for definitions and reconciliations to the most comparable GAAP financial measures.

 

Discussion of Cash Flow

First quarter 2013 Proportional Free Cash Flow (a non-GAAP financial measure) was $352 million, an increase of $117 million from first quarter 2012. This performance was driven by a PPA termination payment at Beaver Valley in the U.S. and lower working capital requirements in the Dominican Republic, partially offset by declines due to higher income tax payments in Colombia and low hydrology in Brazil.

Consolidated Net Cash Provided by Operating Activities increased $84 million to $618 million, driven by the same factors described above.

Dividend Policy

  • The Company announced its dividend policy, which will target a payout ratio of 30% to 40% of sustainable Parent Free Cash Flow (a non-GAAP financial measure)
  • The dividend policy and potential increases will be reviewed annually by management and the Board of Directors
  • The current annual dividend of $0.16 per share, or $120 million, represents a payout ratio of approximately 23% of 2012 Parent Free Cash Flow and 27% of 2013 Parent Free Cash Flow

Discussion of Other Announcements

  • The Company reduced G&A costs by $26 million during first quarter 2013
    • On track to achieve $145 million in annual cost reductions in 2014
  • In April 2013, the Company commenced transactions to reduce recourse debt by up to $300 million, including a senior notes offering of $500 million priced at 4.875% and tender offers totaling up to $800 million expected to close in May 2013
    • After completion of these transactions, the Company's cumulative investment since late 2011 in recourse and non-recourse debt repayments will be approximately $1 billion
  • In April 2013, the Company closed the sale of its remaining interest in Cartagena in Spain for $24 million and the sale of its Ukraine utilities for $109 million, net of transaction fees
    • Since late 2011, the Company has received equity proceeds of $1.1 billion from asset sales and exited operations in six countries
  • In March 2013, the Company achieved commercial operations of the 270 MW coal-fired Ventanas IV plant in Chile
  • In April 2013, the Company commenced construction on Cochrane, a 532 MW coal-fired expansion of the existing Angamos plant in Chile
    • Closed non-recourse project financing of approximately $1 billion and executed long-term power sales agreements
  • On schedule to complete 2,443 MW of capacity under construction expected to come on-line through 2016

2013 Guidance

The Company reaffirmed its full year 2013 guidance, which is based on foreign exchange and commodity price forward curves as of March 31, 2013.

     

Table 2: 2013 Guidance Reconciliation

$ in Millions, Except Per Share Amounts      

Full Year 2013
Guidance

Adjusted EPS1       $ 1.24-1.32
Proportional Free Cash Flow1 (a)       $ 750-1,050
Reconciling Factor2 (b)       $ 1,750-2,050
Consolidated Net Cash Provided by Operating Activities

(a + b)

      $

2,500-3,100

1

 

A non-GAAP financial measure. See "Non-GAAP Financial Measures" for definitions and reconciliations to the most comparable GAAP financial measures.

 

2

Primarily includes minority interest, maintenance capex and environmental capex. See Appendix for details of the reconciliation.

 

Discussion of First Quarter 2013 Operating Drivers of Adjusted PTC and Adjusted EPS

The Company manages its portfolio in six market-oriented Strategic Business Units (SBUs): US (United States), Andes (Chile, Colombia, and Argentina), Brazil, MCAC (Mexico, Central America and the Caribbean), EMEA (Europe, Middle East and Africa), and Asia.

Adjusted Pre-Tax Contribution (Adjusted PTC, a non-GAAP financial measure), is defined by the Company as pre-tax income from continuing operations attributable to AES excluding unrealized gains or losses related to derivative transactions, unrealized foreign currency gains or losses, gains or losses due to dispositions and acquisitions of business interests, losses due to impairments and costs due to the early retirement of debt. Adjusted PTC also includes net equity in earnings of affiliates on an after-tax basis. The Company has concluded that Adjusted PTC best reflects the underlying business performance of the Company and is the most relevant measure considered in the Company's internal evaluation of the financial performance of its segments.

     

Table 3: Adjusted PTC 1 by SBU and Adjusted EPS

$ in Millions, Except Per Share Amounts First Quarter
      2013     2012  
US       $     135     $     93  
Andes       $     80     $     111  
Brazil       $     42     $     108  
MCAC       $     57     $     78  
EMEA       $     93     $     189  
Asia       $     31     $     32  
Total SBUs       $     438     $     611  
Corp/Other       $     (173 )   $     (198 )
Total AES Adjusted PTC 1,2       $     265     $     413  
Adjusted Effective Tax Rate             27 %         32 %
Diluted Share Count             749           785  
Adjusted EPS 1       $     0.26     $     $0.37  

1

 

A non-GAAP financial measure. See "Non-GAAP Financial Measures" for definitions and reconciliations to the most comparable GAAP financial measures.

 

2

Includes $4 million and $13 million of after-tax net equity in earnings of affiliates in first quarter 2013 and 2012, respectively.

 

First quarter 2013 Adjusted PTC decreased $148 million. Key operating drivers of Adjusted PTC included:

  • US - An increase of $42 million, primarily due to the acceleration of future earnings at Beaver Valley as a result of the termination of the PPA during the quarter.
  • Andes - A decrease of $31 million driven by lower dispatch of gas-fired generation in Chile.
  • Brazil - A decrease of $66 million due to low hydrology at Tietê and lower demand at Sul, as well as unfavorable movements in the Brazilian Real.
  • MCAC - A decrease of $21 million due primarily to low hydrology in Panama.
  • EMEA - A decrease of $96 million due primarily to a favorable one-time arbitration settlement at Cartagena in Spain in first quarter 2012 and a decline at Ballylumford in the United Kingdom, driven by a reduction in contracted capacity prices.
  • Asia - With a decrease of $1 million, the Asia SBU was roughly flat from first quarter 2012.
  • Corp/Other - A decline of $25 million due to lower interest and general and administrative expense.

First quarter 2013 Adjusted EPS declined $0.11 to $0.26 due to the reduction in Adjusted PTC, as described above. This reduction was partially offset by a lower effective tax rate and a lower share count.

Non-GAAP Financial Measures

See Non-GAAP Financial Measures for definitions of Adjusted Earnings Per Share, Adjusted Pre-Tax Contribution, Proportional Cash Flow From Operating Activities, Proportional Free Cash Flow, as well as reconciliations to the most comparable GAAP financial measure.

In providing its full year 2013 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 or losses related to derivative transactions (as of March 31, 2013, $0.01 per share); (b) unrealized foreign currency gains or losses (as of March 31, 2013, $0.02 per share); (c) gains or losses due to dispositions and acquisitions of business interests; (d) losses due to impairments (as of March 31, 2013, $0.05 per share); and (e) costs due to the early retirement of debt (as of March 31, 2013, $0.04 per share). 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.

Attachments

Consolidated Statements of Operations, Consolidated Balance Sheets, Segment Information, Consolidated Statements of Cash Flows, Non-GAAP Financial Measures, Parent Financial Information and 2013 Financial Guidance Elements.

Conference Call Information

AES will host a webcast of Investor Day and First Quarter 2013 Results on Thursday, May 9, 2013 at 8:00 a.m. Eastern Daylight Time (EDT). Internet access to the presentation materials will be available on the AES website at www.aes.com by selecting "Investors" and then "Quarterly Financial Results."

A webcast replay will be accessible at www.aes.com beginning shortly after the completion of the call.

About AES

The AES Corporation (NYS: AES) is a Fortune 200 global power company. We provide affordable, sustainable energy to 23 countries through our diverse portfolio of distribution businesses as well as thermal and renewable generation facilities. Our workforce of 25,000 people is committed to operational excellence and meeting the world's changing power needs. Our 2012 revenues were $18 billion and we own and manage $42 billion in total assets. To learn more, please visit www.aes.com.

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' 2012 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 2012 Annual Report on Form 10-K dated on or about February 26, 2013 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
March 31,
2013 2012
 
(in millions, except
per share amounts)
Revenue:
Regulated $ 2,246 $ 2,484
Non-Regulated   2,019     2,102  
Total revenue   4,265     4,586  
Cost of Sales:
Regulated (1,894 ) (2,056 )
Non-Regulated   (1,616 )   (1,458 )
Total cost of sales   (3,510 )   (3,514 )
Gross margin   755     1,072  
General and administrative expenses (61 ) (87 )
Interest expense (377 ) (416 )
Interest income 66 91
Other expense (75 ) (28 )
Other income 68 18
Gain on sale of investments 3 179
Asset impairment expense (48 ) (10 )
Foreign currency transaction losses (32 ) (1 )
Other non-operating expense   -     (49 )
INCOME FROM CONTINUING OPERATIONS BEFORE
TAXES AND EQUITY IN EARNINGS OF AFFILIATES 299 769
Income tax expense (82 ) (268 )
Net equity in earnings of affiliates   4     13  
INCOME FROM CONTINUING OPERATIONS 221 514
Income from operations of discontinued businesses, net of income tax (benefit) expense
of $(1) and $2, respectively 14 6
Net loss from disposal and impairments of discontinued businesses, net of income tax (benefit) expense of $(1) and $0,
respectively   (36 )   (5 )
NET INCOME 199 515
Noncontrolling interests:
Less: Income from continuing operations attributable to noncontrolling interests (115 ) (173 )
Less: Income from discontinued operations attributable to noncontrolling interests   (2 )   (1 )
Total net income attributable to noncontrolling interests   (117 )   (174 )
NET INCOME ATTRIBUTABLE TO THE AES CORPORATION $ 82   $ 341  
 
AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION
COMMON STOCKHOLDERS:
Income from continuing operations, net of tax $ 106 $ 341
Loss from discontinued operations, net of tax   (24 )   -  
Net income $ 82   $ 341  
BASIC EARNINGS PER SHARE:
Income from continuing operations attributable to The AES Corporation
common stockholders, net of tax $ 0.14 $ 0.45
Loss from discontinued operations attributable to The AES Corporation common
stockholders, net of tax

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