AES Reports Strong Third Quarter 2018 Results; Advances on Key Strategic Objectives
ARLINGTON, Va.--(BUSINESS WIRE)--Nov 6, 2018--The AES Corporation (NYSE: AES) today reported financial results for the quarter ended September 30, 2018.
“During the third quarter, we continued to successfully execute on our strategic plan. On the renewables front, we signed 392 MW of long-term contracts, bringing our year-to-date total to 1.9 GW and increasing our backlog of projects to 5.7 GW. This includes the first 270 MW of ‘green blend and extend’ we recently signed in Chile, which will allow us to reduce our carbon intensity, while extending AES Gener’s average contract life at attractive returns,” said Andrés Gluski, AES President and Chief Executive Officer. “We also agreed to sell 24% of sPower’s operating fleet and we will invest the proceeds in sPower’s 10 GW development pipeline, yielding higher returns. Regarding LNG in Central America and the Caribbean, we signed a long-term LNG supply agreement for 9 TBTU per year in the Dominican Republic, nearly fully utilizing the terminal’s capacity. We expect to replicate this success in Panama, where approximately 60% of the tank’s capacity is available for future growth.”
“We are pleased with our third quarter performance, including our Adjusted EPS, which was 52% higher than in third quarter 2017, and reflects higher contributions from our South America and US and Utilities SBUs. Further, our year-to-date results put us on track to achieve our 2018 guidance and we remain confident that we will deliver on our longer-term expectations through 2020,” said Tom O’Flynn, AES Executive Vice President and Chief Financial Officer. “We are continuing on our path to investment grade credit metrics in 2019 and ratings in 2020.”
Key Q3 2018 Financial Results
Third quarter 2018 Diluted Earnings Per Share from Continuing Operations (Diluted EPS) was $0.15, a decrease of $0.07 compared to third quarter 2017, primarily reflecting $0.10 impairment expense at a U.S. generation facility due to the imminent expiration of the plant’s Power Purchase Agreement (PPA), and a $0.05 non-cash charge to true-up the provisional estimate of U.S. tax reform. These impacts were partially offset by lower debt extinguishment costs, lower Parent interest expense and higher margins.
Third quarter 2018 Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) was $0.35, an increase of $0.12 compared to third quarter 2017. This reflects higher margins in the South America and US and Utilities Strategic Business Units (SBU), a lower effective quarterly tax rate, and lower Parent interest expense.
Detailed Strategic HighlightsOn track to achieve $100 million cost savings program Backlog of 5,701 MW includes: 3,836 MW under construction and coming on-line through 2021; and1,865 MW of renewables signed year-to-date under long-term PPAs, including 392 MW signed since the Company’s Q2 2018 earnings call: 270 MW Candelaria project, which allows the Company to extend an existing thermal PPA in Chile by replacing the capacity with wind and solar100 MW of solar capacity at sPower with a utility customer in the U.S. In October, the Company agreed to sell approximately 24% of its interest in sPower’s 1.3 GW operating portfolio to a subsidiary of Ullico Inc., an insurance and financial services company in the U.S. Alberta Investment Management Corporation (AIMCo) also sold approximately 24% of its interest in sPower’s operating portfolio to UllicoOnce the sale closes, AES’ ownership in sPower’s operating portfolio will decrease from 50% to 38%This transaction, combined with steps the Company has taken, including two previously completed refinancings and reduced operating costs, increases the Company’s return on sPower’s operating portfolio to 13%The proceeds from this transaction and dividends received since the acquisition in 2017, represent more than half of AES’ original investment in sPower In October, the Company signed a 10-year agreement for 9 TBTU annually in the Dominican Republic The Company owns two LNG regasification and storage facilities in the Dominican Republic and Panama, with total annual capacity of 150 TBTUYear-to-date the Company has sold 25 TBTU of its excess LNG capacity, to meet growing demand for efficient natural gas in the region, leaving approximately 60 TBTU of excess capacity representing potential upside In October, DPL was upgraded to investment grade by both Fitch and Moody’s; DPL is now rated investment grade by all three ratings agencies In September, DPL received an order from the Public Utilities Commission of Ohio, successfully completing its distribution rate case, and began collecting new rates on October 1, 2018 In October, IPL received an order from the Indiana Utility Regulatory Commission, authorizing new rates to become effective on December 5, 2018
Guidance and Expectations 1
The Company reaffirms its 2018 Adjusted EPS guidance of $1.15 to $1.25 and its average annual growth rate target of 8% to 10% through 2020. Growth in 2018 will be primarily driven by contributions from new businesses, cost savings and lower Parent interest.
The Company also reaffirms its 2018 Parent Free Cash Flow expectation of $600 million to $675 million.
The Company’s 2018 guidance and expectations through 2020 are based on foreign currency and commodity forward curves as of September 30, 2018.
Non-GAAP Financial Measures
See Non-GAAP Measures for definitions of Adjusted Earnings Per Share and Adjusted Pre-Tax Contributions, as well as reconciliations to the most comparable GAAP financial measures.
Parent Free Cash Flow should not be construed as an alternative to Net Cash Provided by Operating Activities which is determined in accordance with GAAP. Parent Free Cash Flow is equal to Subsidiary Distributions less cash used for interest costs, development, general and administrative activities, and tax payments by the Parent Company. Parent Free Cash Flow is used for dividends, share repurchases, growth investments, recourse debt repayments, and other uses by the Parent Company.
Condensed Consolidated Statements of Operations, Segment Information, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Non-GAAP Measures and Parent Financial Information.
Conference Call Information
AES will host a conference call on Tuesday, November 6, 2018 at 9:00 a.m. Eastern Standard Time (EST). 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 4095848. 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.
The AES Corporation (NYSE: AES) is a Fortune 500 global power company. We provide affordable, sustainable energy to 15 countries through our diverse portfolio of distribution businesses as well as thermal and renewable generation facilities. Our workforce is committed to operational excellence and meeting the world’s changing power needs. Our 2017 revenues were $11 billion and we own and manage $33 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’ 2017 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 2017 Annual Report on Form 10-K dated on or about February 26, 2018 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.
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CONTACT: The AES Corporation
Ahmed Pasha, 703-682-6451
Amy Ackerman, 703-682-6399
KEYWORD: UNITED STATES NORTH AMERICA VIRGINIA
INDUSTRY KEYWORD: ENERGY ALTERNATIVE ENERGY COAL OIL/GAS UTILITIES NUCLEAR
SOURCE: The AES Corporation
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PUB: 11/06/2018 06:00 AM/DISC: 11/06/2018 06:01 AM