Market Overview

AES on Track to Attain Investment Grade Credit Ratings in 2020 and Reaffirms Outlook Through 2022

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Strategic Objectives and Accomplishments

  • Leveraging leading position to capture attractive renewable growth by signing 1 GW of new PPAs year-to-date, bringing total backlog to 6.8 GW
  • Growing utilities business by investing in new technologies and grid modernization with a recently filed $1.2 billion plan at IPL
  • Fluence maintaining global leadership in fast-growing energy storage market with 1 GW of projects awarded or delivered

Q2 2019 Financial Highlights

  • Diluted EPS of $0.02, compared to $0.15 in Q2 2018
  • Adjusted EPS1 of $0.26, compared to $0.25 in Q2 2018
  • Reaffirming midpoint of 2019 guidance and 7% to 9% average annual growth target for Adjusted EPS and Parent Free Cash Flow through 20221

The AES Corporation (NYSE:AES) today reported financial results for the quarter ended June 30, 2019.

"We continue to make substantial progress on our strategic priorities: improving our credit profile, investing in new technologies and greening our portfolio. So far this year we have sold 2.4 GW of thermal generation, signed long-term contracts for 1 GW of renewables, and leveraged our existing LNG infrastructure to expand our storage capacity by 50 TBTU in the Dominican Republic. As a result of our actions, we expect to reduce our coal generation to below 30% of our total megawatt-hours of generation by 2022," said Andrés Gluski, AES President and Chief Executive Officer. "I am also pleased to reaffirm our 7% to 9% average annual growth target through 2022, which combined with our current dividend yield, provides a double-digit annual total return to our shareholders."

"Based on our year-to-date results and our expected growth in the second half of the year, we are on track to achieve our 2019 guidance," said Gustavo Pimenta, AES Executive Vice President and Chief Financial Officer. "As our portfolio continues to evolve and grow, so will our discretionary cash, which we will use to invest in sustainable generation and our utilities, while maintaining investment grade credit metrics."

Key Q2 2019 Financial Results

Second quarter 2019 Diluted Earnings Per Share from Continuing Operations (Diluted EPS) was $0.02, a decrease of $0.13 compared to second quarter 2018, primarily reflecting the favorable impact of $0.10 related to the sale of businesses in Chile and Brazil in 2018.

Second quarter 2019 Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) was $0.26, an increase of $0.01 compared to second quarter 2018, primarily reflecting higher contributions from the US and Utilities SBU and a lower tax rate, partially offset by the timing of planned outages and asset sales.

Detailed Strategic Overview

The Company is leveraging its competitive position to benefit from rapid growth in renewables, which are expected to grow by 50 GW annually in the Company's key markets through 2022.

  • The Company is on track to become one of the five largest renewable developers in the world, outside of China, by adding 2 to 3 GW of renewables to its backlog annually.
    • In year-to-date 2019, the Company has signed 1,019 MW of renewables under long-term Power Purchase Agreements (PPA), primarily including:
      • 262 MW of solar and solar plus storage at AES Distributed Energy (AES DE) in the U.S.;
      • 255 MW of solar at sPower in the U.S.;
      • 213 MW of wind and solar at AES Colombia;
      • 181 MW of Green Blend and Extend contracts at AES Gener in Chile; and
      • 100 MW of energy storage in the U.S.
    • As of August 2019, the Company's backlog of 6,764 MW includes:
      • 4,546 MW under construction and expected on-line through 2021; and
      • 2,218 MW of renewables signed under long-term PPAs.
  • As a result of executing on its strategy, the Company is targeting a 50% reduction in carbon intensity by 2022 and a 70% reduction by 2030, both off a 2016 base. The Company also expects that coal will represent less than 30% of its total generation volume by 2022.
  • The Company is accelerating growth in its utilities business through grid modernization and infrastructure investments.
    • Indianapolis Power & Light recently filed a $1.2 billion seven-year plan with the Indiana Utility Regulatory Commission.
  • The Company continues to deploy new technologies in order to maintain its market-leading positions.
    • The Company's energy storage joint venture with Siemens, Fluence, is the global leader in this fast-growing market, which is expected to increase from 6 GW of installed capacity in 2017 to more than 40 GW by 2022.
      • Fluence has surpassed more than 1 GW of capacity awarded or delivered, including 424 MW awarded in year-to-date 2019.
    • The Company announced the merger of Simple Energy to form Uplight, which is now the market leader in providing cloud-based energy solutions in the U.S., serving 74 electric and gas utilities.

Guidance and Expectations1

The Company reaffirms its 2019 Adjusted EPS guidance midpoint of $1.34 and narrows the range from $1.28 to $1.40 to $1.30 to $1.38. The Company also reaffirms its average annual growth rate target of 7% to 9% through 2022.

The Company also reaffirms its 2019 Parent Free Cash Flow expectation of $700 million to $750 million and its average annual growth rate target of 7% to 9% through 2022.

1

Adjusted EPS and Parent Free Cash Flow are non-GAAP financial measures. See attached "Non-GAAP Measures" for definition of Adjusted EPS and see below for definition of Parent Free Cash Flow. The Company is not able to provide a corresponding GAAP equivalent or reconciliation for its Adjusted EPS guidance or its Parent Free Cash Flow expectation without unreasonable effort. See "Non-GAAP measures" for a description of the adjustments to reconcile Adjusted EPS to Diluted EPS for the quarter ended June 30, 2019.

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.

Attachments

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

Conference Call Information

AES will host a conference call on Tuesday, August 6, 2019 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 4712192. 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 500 global power company. We provide affordable, sustainable energy to 14 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 2018 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 the execution of PPAs, conversion of our backlog and 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' 2018 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 2018 Annual Report on Form 10-K filed February 27, 2019 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 June 30,

 

Six Months Ended June 30,

 

2019

 

2018

 

2019

 

2018

 

(in millions, except per share amounts)

Revenue:

 

 

 

 

Regulated

$

724

 

$

716

 

$

1,509

 

$

1,438

 

Non-Regulated

 

1,759

 

 

1,821

 

 

3,624

 

 

3,839

 

Total revenue

 

2,483

 

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