AES Reports Strong Third Quarter Results and Increases 2009 Full Year Earnings and Free Cash Flow Guidance
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-- Diluted EPS from Continuing Operations up 27% to $0.28 and Adjusted EPS
down 16% to $0.26
-- Consolidated Cash Flow from Operating Activities up 28% to $1.0 Billion
and Proportional Cash Flow from Operating Activities up 29% to $553
Million
-- Consolidated Free Cash Flow up 34% to $884 Million and Proportional Free
Cash Flow up 39% to $459 Million
-- Brought 434 MW into commercial operation
ARLINGTON, Va.--(BUSINESS WIRE)-- The AES Corporation (NYSE: AES) today reported results for the third quarter ended September 30, 2009.
"The strong quarterly performance was driven by higher margins at our generation businesses in Chile and in the Philippines. Contributions from these businesses helped us offset weak results at our North American operations which were negatively impacted by lower volumes. Based on our year-to-date results, we are increasing our 2009 adjusted earnings and free cash flow guidance," said Paul Hanrahan, AES President and Chief Executive Officer. "We also continued to make good progress on our 3,500 MW construction program and have now completed 808 MW of which 95% is contracted under long-term contracts. On the development front, strong regulatory support for renewable energy and the growing need for power in various high growth markets continue to provide us with attractive opportunities that will drive our growth beyond 2011."
Third Quarter 2009 Financial Highlights:
During the quarter, AES benefited from improved operating performance at its generation businesses in Chile and the Philippines as well as its Brazilian utilities. The Company's focus on improvements in working capital and continued efforts to lower operating expenses also contributed to the third quarter results. These trends helped offset unfavorable foreign currency impacts, as well as reduced demand and lower wholesale prices in North America.
Results for the quarter ended September 30, 2009 include the following:
Third Third Full Year Full Year
YTD
Quarter Quarter 2009 Guidance 2009 Guidance
9/30/09
2009 2008 as of 8/7/09 as of 11/5/09
Consolidated $3.8 B $4.3 B $10.7 B NA NA
Revenue
Consolidated Gross $1.0 B $1.0 B $2.7 B $3.5 - $3.6 B $3.55 - $3.65 B
Margin
Proportional Gross
Margin (a non-GAAP $555 M $601 M $1.6 B $2.1 - $2.15 B $2.1 - $2.15 B
financial measure)
Consolidated Cash
Flow from Operating $1.0 B $803 M $1.9 B $2.1 - $2.2 B $2.1 - $2.2 B
Activities
Proportional Cash
Flow from Operating
Activities (a $553 M $430 M $1.2 B $1.25 - $1.35 B $1.3 - $1.35 B
non-GAAP financial
measure)
Consolidated Free
Cash Flow (a $884 M $662 M $1.5 B $1.4 - $1.5 B $1.45 - $1.55 B
non-GAAP financial
measure)
Proportional Free
Cash Flow (a $459 M $330 M $850 M $750 - $850 M $825 - $875 M
non-GAAP financial
measure)
Subsidiary
Distributions to $202 M $184 M $1.0 B $1.2 - $1.3 B $1.2 - $1.3 B
the Parent Company
(see definitions)
Diluted EPS from
Continuing $0.28 $0.22 $1.06 $1.15 - $1.20 $1.20 - $1.24
Operations
Diluted EPS $0.28 $0.22 $1.06 NA NA
Adjusted EPS (a
non-GAAP financial $0.26 $0.31 $0.91 $1.05 - $1.10 $1.07 - $1.11
measure)
Key drivers of the third quarter results include (comparison of Q3 2009 vs. Q3 2008):
-- Consolidated Revenue decreased by $481 million to $3.8 billion. Of that
amount, $367 million or 76 percent was due to the strengthening of the
U.S. Dollar relative to foreign currencies. In particular, the Brazilian
Real depreciated 13 percent, representing more than $200 million of the
decline in revenue. In addition, lower commodity input prices translated
into lower revenues at its generation businesses in Chile, New York,
Hungary and Northern Ireland. The Latin America utilities business
contributed higher revenues primarily as a result of increases in tariff
rates in Brazil, reflecting the recovery of energy purchases that were
passed through to customers.
-- Consolidated Gross Margin increased by $46 million to $1.0 billion,
benefiting from improved operating performance at its generation
businesses in Chile and the Philippines, as well as the recovery of bad
debts at Eletropaulo, one of the Company's utilities in Brazil. These
improvements were offset in part by the strengthening of the U.S. Dollar
relative to foreign currencies totaling $79 million and lower volume at
Eastern Energy in New York due to unfavorable electricity pricing,
resulting in lower dispatch.
-- Proportional Gross Margin (a non-GAAP financial measure, see Appendix
for definition and reconciliation) decreased by $46 million to $555
million, primarily due to the unfavorable impact of foreign exchange
rates, as well as lower volumes at its wholly-owned generation business
in New York and its integrated utility in Indiana, IPL. These factors
were offset in part by improved operations at Gener in Chile and
Masinloc in the Philippines.
-- Consolidated Cash Flow from Operating Activities increased by $225
million to $1.0 billion, reflecting higher gross margin and $91 million
of improved working capital at its generation business in Chile. In
addition, collection of receivables at its generation businesses in
Pakistan helped improve working capital by approximately $81 million.
-- Proportional Cash Flow from Operating Activities (a non-GAAP financial
measure, see Appendix for definition and reconciliation) increased by
$123 million to $553 million.
-- Consolidated Free Cash Flow (a non-GAAP financial measure, see Appendix
for definition and reconciliation) increased by $222 million to $884
million. The 2009 quarterly results reflect the improvement in
Consolidated Cash Flow from Operating Activities.
-- Proportional Free Cash Flow (a non-GAAP financial measure, see Appendix
for definition and reconciliation) increased by $129 million to $459
million.
-- Diluted Earnings Per Share (EPS) from Continuing Operations increased
$0.06 per share to $0.28 per share.
-- Adjusted EPS (a non-GAAP financial measure, see Appendix for definition
and reconciliation) decreased $0.05 per share to $0.26 per share. The
2008 results include $0.07 gain associated with a tax restructuring and
the release of a tax liability at two of the Company's North America
subsidiaries.
Q3 2009 Q3 2008
Diluted Earnings Per Share from Continuing Operations $0.28 $0.22
FAS 133 Mark-to-Market (Gains)/Losses $0.03 $0.01
Currency Transaction (Gains)/Losses ($0.03) $0.06
Disposition/Acquisition (Gains)/Losses ($0.02) -
Impairment Losses - $0.02
Debt Retirement (Gains)/Losses - -
Adjusted Earnings Per Share $0.26 $0.31
See Appendix for more detail.
Year-to-Date 2009 Financial Highlights (comparison of Q3 2009 YTD vs. Q3 2008 YTD):
The Company's continued focus on improving operations, lowering corporate overhead and improving working capital contributed to the year-to-date results. In particular, the Company benefited from improved operating performance at its generation businesses in Chile and Asia, as well as its businesses in Brazil. These improvements helped offset unfavorable foreign currency impacts as well as reduced demand and lower wholesale prices in North America.
Key drivers of the year-to-date results include:
-- Consolidated Revenue decreased by $1.8 billion to $10.7 billion. Of that
amount, $1.5 billion, or 83 percent, was due to the strengthening of the
U.S. Dollar relative to foreign currencies. In particular, the Brazilian
Real depreciated 24 percent, representing approximately $1.0 billion of
the decline in revenue. In addition, lower commodity input prices
translated into lower revenue at the Company's generation businesses in
Chile, New York, Hungary and Northern Ireland. The results also reflect
(i) the decrease in volume at Uruguaiana in Brazil due to the
renegotiation of its power sales agreements in 2009, and (ii) the sale
of the Northern Kazakhstan assets in May 2008. Latin American utilities
contributed higher revenues, primarily as a result of tariff increases
in Brazil and El Salvador, reflecting the recovery of energy purchases
that were passed through to customers.
-- Consolidated Gross Margin decreased by $295 million to $2.7 billion. The
decline in Consolidated Gross Margin was primarily due to the
strengthening of the U.S. Dollar relative to key currencies totaling
$316 million and a net mark-to-market, non-cash derivative gain of
approximately $67 million recorded in 2008. Gross Margin benefited from
improved operating performance at the Company's generation businesses in
Chile and the Philippines, as well as the restructuring of power sales
agreements for its Uruguaiana generation business in Brazil. These
improvements were offset by lower electricity prices and volume at the
Company's generation businesses in Argentina and New York, as well as
the loss of contribution from the Northern Kazakhstan businesses sold in
May 2008.
-- Proportional Gross Margin (a non-GAAP financial measure, see Appendix
for definition and reconciliation) declined by $346 million to $1.6
billion, primarily due to: lower electricity prices and volumes at the
Company's generation businesses in Argentina and New York; unfavorable
net mark-to-market derivative adjustments at North America subsidiaries;
unfavorable foreign currency exchange rates; and loss of the
contribution from the Northern Kazakhstan businesses sold in 2008. These
decreases were offset in part by improved operations in Chile and the
Philippines.
-- Consolidated Cash Flow from Operating Activities increased by $312
million to $1.9 billion, reflecting higher gross margin at the Company's
generation businesses in Chile and the Philippines. In addition,
collection of receivables at the Company's generation businesses in
Pakistan and lower fuel inventories in Chile improved working capital.
-- Proportional Cash Flow from Operating Activities (a non-GAAP financial
measure, see Appendix for definition and reconciliation) increased by
$436 million to $1.2 billion.
-- Consolidated Free Cash Flow (a non-GAAP financial measure, see Appendix
for definition and reconciliation) increased by $388 million to $1.5
billion. The 2009 results reflect both higher Consolidated Operating
Cash Flow and lower maintenance capital expenditures.
-- Proportional Free Cash Flow (a non-GAAP financial measure, see Appendix
for definition and reconciliation) increased by $482 million to $850
million.
-- Diluted EPS from Continuing Operations of $1.06 per share, compared to
$1.87 per share in 2008. The 2009 results include a $98 million or $0.15
gain related to the final settlement of the Northern Kazakhstan assets
sold in 2008. The 2008 results include a net gain from sale of Northern
Kazakhstan assets of $1.05.
-- Adjusted EPS (a non-GAAP financial measure, see Appendix for definition
and reconciliation), of $0.91, compared to $0.91 per share in 2008. The
2009 results exclude a $98 million or $0.15 gain related to the final
settlement of the Northern Kazakhstan assets sold in 2008, $0.03 of
non-cash, unrealized foreign currency transaction gains and $0.05 of
non-cash mark-to-market derivative losses.
Q3 YTD 2009 Q3 YTD 2008
Diluted Earnings Per Share from Continuing Operations $1.06 $1.87
FAS 133 Mark-to-Market (Gains)/Losses $0.05 ($0.07)
Currency Transaction (Gains)/Losses ($0.03) $0.10
Disposition/Acquisition (Gains)/Losses ($0.19) ($1.31)
Impairment Losses $0.02 $0.07
Debt Retirement (Gains)/Losses - $0.25
Adjusted Earnings Per Share $0.91 $0.91
See Appendix for more detail.
Other Key Highlights:
-- Began commercial operation of 434 MW of generation capacity, including
the 380 MW combined cycle natural gas facility Amman East in Jordan, the
49.5 MW wind facility Huanghua I in China, and 4 MW of Innovent wind
projects in France. The Company has completed 808 MW, or approximately
23 percent of its 3,500 MW construction program.
-- Raised approximately $80 million of long-term financing for 10 MW of
solar photovoltaic projects in Western Europe, all of which are located
in markets with attractive feed-in tariffs.
-- North America utility IPL received a $20 million SmartGrid grant from
the U.S. Department of Energy to install an advanced meter system.
-- Voluntarily reduced the remaining portion of the Company's senior
unsecured credit facility with Merrill Lynch in October.
2009 Guidance
Based on the Company's performance through the first nine months of 2009 and the current outlook for the remainder of the year, the Company is increasing its full year earnings guidance and Proportional Cash Flow guidance.
Summary of key changes made to 2009 full year guidance includes:
-- Increased midpoint of Adjusted Earnings Per Share (a non-GAAP financial
measure) range by $0.01 to $1.09.
-- Increased midpoint of Diluted Earnings Per Share from Continuing
Operations range by $0.04 to $1.22.
-- Increased midpoint of Proportional Free Cash Flow (a non-GAAP financial
measure) range by $50 million to $850 million.
Non-GAAP Financial Measures
See Non-GAAP Financial Measures for definitions of Adjusted Earnings Per Share, Proportional Gross Margin, Proportional Operating Cash Flow, Free Cash Flow, Proportional Free Cash Flow and Parent Company Liquidity, as well as reconciliations to the most comparable GAAP financial measure.
Attachments
Consolidated Statements of Operations, Segment Information, Consolidated Balance Sheets, Consolidated Statements of Cash Flows, Non-GAAP Financial Measures, Parent Financial Information and 2009 Financial Guidance.
About AES
The AES Corporation (NYSE: AES) is a Fortune 500 global power company with generation and distribution businesses. Through our diverse portfolio of thermal and renewable fuel sources, we provide affordable and sustainable energy to 29 countries. Our workforce of 25,000 people is committed to operational excellence and meeting the world's changing power needs. Our 2008 revenues were $16 billion and we own and manage $35 billion in total assets. BusinessWeek named AES to its 2009 "BW 50 Best Performers" list. 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, including, but not limited to, the risks discussed under Item 1A "Risk Factors" in AES' 2008 Annual Report on Form 10-K. 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.
THE AES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
($ in millions, except per share 2009 2008 2009 2008
amounts)
Revenues $ 3,838 $ 4,319 $ 10,711 $ 12,526
Cost of sales (2,830 ) (3,357 ) (7,973 ) (9,493 )
GROSS MARGIN 1,008 962 2,738 3,033
General and administrative (82 ) (90 ) (255 ) (287 )
expenses
Interest expense (421 ) (458 ) (1,195 ) (1,362 )
Interest income 94 156 282 405
Other expense (15 ) (18 ) (67 ) (128 )
Other income 35 63 279 258
Gain on sale of investments 17 - 132 912
Impairment expense (6 ) (22 ) (7 ) (94 )
Foreign currency transaction (1 ) (60 ) (13 ) (123 )
losses on net monetary position
Other non-operating expense (2 ) - (12 ) -
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 627 533 1,882 2,614
AND EQUITY IN EARNINGS OF
AFFILIATES
Income tax expense (205 ) (168 ) (485 ) (725 )
Net equity in earnings (losses) 18 (4 ) 75 38
of affiliates
INCOME FROM CONTINUING 440 361 1,472 1,927
OPERATIONS
(Loss) income from operations of
discontinued businesses, net of - (2 ) - 1
tax
Loss from disposal of
discontinued businesses, net of - - - (1 )
tax
NET INCOME 440 359 1,472 1,927
Less: Net income attributable to (255 ) (214 ) (766 ) (646 )
noncontrolling interests
NET INCOME ATTRIBUTABLE TO THE $ 185 $ 145 $ 706 $ 1,281
AES CORPORATION
DILUTED EARNINGS PER SHARE:
Income from continuing
operations attributable to The $ 0.28 $ 0.22 $ 1.06 $ 1.87
AES Corporation common
stockholders, net of tax
Discontinued operations
attributable to The AES - - - -
Corporation common stockholders,
net of tax
NET INCOME ATTRIBUTABLE TO THE
AES CORPORATION COMMON $ 0.28 $ 0.22 $ 1.06 $ 1.87
STOCKHOLDERS
AMOUNTS ATTRIBUTABLE TO THE AES
CORPORATION COMMON STOCKHOLDERS:
Income from continuing $ 185 $ 147 $ 706 $ 1,281
operations, net of tax
Discontinued operations, net of - (2 ) - -
tax
NET INCOME $ 185 $ 145 $ 706 $ 1,281
THE AES CORPORATION
SEGMENT INFORMATION (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
($ in millions) 2009 2008 2009 2008
REVENUES
Latin America - Generation $ 1,008 $ 1,195 $ 2,794 $ 3,578
Latin America - Utilities 1,672 1,604 4,253 4,644
North America - Generation 486 616 1,463 1,705
North America - Utilities 266 288 817 804
Europe - Generation 157 262 513 834
Asia - Generation 291 372 875 985
Corporate and Other (42 ) (18 ) (4 ) (24 )
Total Revenue $ 3,838 $ 4,319 $ 10,711 $ 12,526
GROSS MARGIN
Latin America - Generation $ 388 $ 385 $ 1,095 $ 1,103
Latin America - Utilities 294 246 640 725
North America - Generation 104 147 346 549
North America - Utilities 65 81 186 194
Europe - Generation 34 40 128 219
Asia - Generation 71 37 195 125
Corporate and Other 52 26 148 118
Total Gross Margin $ 1,008 $ 962 $ 2,738 $ 3,033
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND EQUITY IN
EARNINGS OF AFFILIATES
Latin America - Generation $ 314 $ 355 $ 1,003 $ 915
Latin America - Utilities 257 201 661 700
North America - Generation 35 99 150 380
North America - Utilities 38 49 94 85
Europe - Generation 36 28 281 1,117
Asia - Generation 83 (21 ) 130 (24 )
Corporate and Other (136 ) (178 ) (437 ) (559 )
Total Income from Continuing
Operations before Income Taxes and $ 627 $ 533 $ 1,882 $ 2,614
Equity in Earnings of Affiliates
THE AES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
September 30, December 31,
($ in millions, except shares and par value) 2009 2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,020 $ 903
Restricted cash 510 729
Short-term investments 1,357 1,382
Accounts receivable, net of allowance for doubtful 2,387 2,233
accounts of $275 and $254, respectively
Inventory 578 564
Receivable from affiliates 28 31
Deferred income taxes - current 158 180
Prepaid expenses 274 177
Other current assets 1,416 1,117
Total current assets 8,728 7,316
NONCURRENT ASSETS
Property, Plant and Equipment:
Land 1,092 854
Electric generation, distribution assets, and other 27,467 24,654
Accumulated depreciation (8,799 ) (7,515 )
Construction in progress 4,466 3,410
Property, plant and equipment, net 24,226 21,403
Other assets:
Deferred financing costs, net of accumulated 391 366
amortization of $292 and $272, respectively
Investment in and advances to affiliates 1,109 901
Debt service reserves and other deposits 655 636
Goodwill 1,423 1,421
Other intangible assets, net of accumulated 487 500
amortization of $202 and $185, respectively
Deferred income taxes - noncurrent 674 567
Other assets 1,568 1,696
Total other assets 6,307 6,087
TOTAL ASSETS $ 39,261 $ 34,806
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,223 $ 1,042
Accrued interest 358 252
Accrued and other liabilities 3,086 2,660
Non-recourse debt - current 1,357 1,074
Recourse debt - current 214 154
Total current liabilities 6,238 5,182
LONG-TERM LIABILITIES
Non-recourse debt - noncurrent 12,791 11,869
Recourse debt - noncurrent 5,298 4,994
Deferred income taxes - noncurrent 1,316 1,132
Pension and other post-retirement liabilities 1,158 1,017
Other long-term liabilities 3,835 3,525
Total long-term liabilities 24,398 22,537
Commitments and contingent liabilities
Cumulative preferred stock of subsidiary 60 60
EQUITY
THE AES CORPORATION STOCKHOLDERS' EQUITY
Common stock ($.01 par value, 1,200,000,000 shares
authorized; 677,017,626 issued and 667,483,036
outstanding at September 30, 2009; 673,478,012 7 7
issued and 662,786,745 outstanding at December 31,
2008)
Additional paid-in capital 6,859 6,832
Retained earnings (accumulated deficit) 698 (8 )
Accumulated other comprehensive loss (2,855 ) (3,018 )
Treasury stock, at cost (9,534,590 and 10,691,267
shares at September 30, 2009 and December 31, 2008, (126 ) (144 )
respectively)
Total The AES Corporation stockholders' equity 4,583 3,669
NONCONTROLLING INTERESTS 3,982 3,358
Total equity 8,565 7,027
TOTAL LIABILITIES AND EQUITY $ 39,261 $ 34,806
THE AES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
($ in millions) 2009 2008 2009 2008
OPERATING ACTIVITIES
Net income $ 440 $ 359 $ 1,472 $ 1,927
Adjustments to net income:
Depreciation and amortization 269 260 767 760
(Gain) loss from sale of
investments and impairment (12 ) 18 (115 ) (832 )
expense
Provision for deferred taxes 87 88 (24 ) 296
Settlement of non-cash 40 79 (14 ) 44
contingencies
Loss (gain) on extinguishment of - 1 (3 ) 56
debt
Other 29 44 33 (76 )
Changes in operating assets and
liabilities:
Increase in accounts receivable (79 ) (120 ) (82 ) (363 )
Decrease (increase) in inventory 1 (22 ) (10 ) (101 )
Decrease (increase) in prepaid
expenses and other current 83 182 114 (35 )
assets
Decrease (increase) in other 6 (125 ) (133 ) (246 )
assets
Increase (decrease) in accounts 133 171 (159 ) 156
payable and accrued liabilities
Increase (decrease) in income
taxes receivables and payables, 42 (1 ) 96 88
net
Decrease in other long-term (11 ) (131 ) (43 ) (87 )
liabilities
Net cash provided by operating 1,028 803 1,899 1,587
activities
INVESTING ACTIVITIES
Capital expenditures (572 ) (578 ) (1,765 ) (1,963 )
Acquisitions-net of cash - 2 - (1,135 )
acquired
Proceeds from the sales of - - 2 1,093
businesses
Proceeds from the sales of 12 22 16 102
assets
Sale of short-term investments 1,008 1,233 3,277 4,121
Purchase of short-term (1,034 ) (1,375 ) (2,774 ) (4,262 )
investments
(Increase) decrease in (33 ) (59 ) 272 (57 )
restricted cash
Decrease (increase) in debt
service reserves and other 40 22 80 (38 )
assets
Affiliate advances and equity (50 ) (57 ) (137 ) (205 )
investments
Loan advances - - - (173 )
Other investing (31 ) (13 ) (15 ) 79
Net cash used in investing (660 ) (803 ) (1,044 ) (2,438 )
activities
FINANCING ACTIVITIES
(Repayments) borrowing under the (65 ) 183 (96 ) 382
revolving credit facilities, net
Issuance of recourse debt - - 503 625
Issuance of non-recourse debt 373 342 1,189 1,908
Repayments of recourse debt - - (154 ) (1,037 )
Repayments of non-recourse debt (131 ) (363 ) (622 ) (1,037 )
Payments for deferred financing (19 ) (26 ) (72 ) (62 )
costs
Distributions to noncontrolling (227 ) (206 ) (561 ) (450 )
interests
Contributions from 1 246 75 407
noncontrolling interests
Financed capital expenditures (3 ) (1 ) (27 ) (52 )
Purchase of treasury stock - (143 ) - (143 )
Other financing (17 ) 4 8 21
Net cash (used in) provided by (88 ) 36 243 562
financing activities
Effect of exchange rate changes 5 (53 ) 19 (50 )
on cash
Total increase (decrease) in 285 (17 ) 1,117 (339 )
cash and cash equivalents
Cash and cash equivalents, 1,735 1,721 903 2,043
beginning
Cash and cash equivalents, $ 2,020 $ 1,704 $ 2,020 $ 1,704
ending
THE AES CORPORATION
NON-GAAP FINANCIAL MEASURES(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
($ in millions, except 2009 2008 2009 2008
per share amounts)
Reconciliation of
Adjusted Earnings Per
Share(1)
Diluted EPS From $ 0.28 $ 0.22 $ 1.06 $ 1.87
Continuing Operations
FAS 133 Mark to Market 0.03 0.01 0.05 (0.07)
(Gains)/Losses
Currency Transaction (0.03) 0.06 (0.03) 0.10
(Gains)/Losses
Disposition/Acquisition (0.02) (2) - (0.19) (3) (1.31) (4)
(Gains)/Losses
Impairment Losses - 0.02 (5) 0.02 (6) 0.07 (7)
Debt Retirement - - - 0.25 (8)
(Gains)/Losses
Adjusted Earnings Per $ 0.26 $ 0.31 $ 0.91 $ 0.91
Share(1)
Capital Expenditures
Operational Capital $ 134 $ 123 $ 384 $ 437
Expenditures (a)
Environmental Capital 10 18 45 68
Expenditures (b)
Maintenance Capital 144 141 429 505
Expenditures (a + b)
Growth Capital 431 438 1,363 1,510
Expenditures
Total Capital $ 575 $ 579 $ 1,792 $ 2,015
Expenditures
Reconciliation of
Proportional Operating
Cash Flow
Consolidated Operating $ 1,028 $ 803 $ 1,899 $ 1,587
Cash Flow
Less: Proportional 475 373 741 865
Adjustment Factor
Proportional Operating $ 553 $ 430 $ 1,158 $ 722
Cash Flow(9),(10)
Reconciliation of Free
Cash Flow
Net Cash from Operating $ 1,028 $ 803 $ 1,899 $ 1,587
Activities
Less: Maintenance 144 141 429 505
Capital Expenditures
Free Cash Flow(9) $ 884 $ 662 $ 1,470 $ 1,082
Reconciliation of
Proportional Free Cash
Flow
Proportional Net Cash
from Operating $ 553 $ 430 $ 1,158 $ 722
Activities
Less: Proportional
Maintenance Capital 94 100 308 354
Expenditures
Proportional Free Cash $ 459 $ 330 $ 850 $ 368
Flow(9),(10)
Reconciliation of
Proportional Gross
Margin
Consolidated Gross $ 1,008 $ 962 $ 2,738 $ 3,033
Margin
Less: Proportional 453 361 1,141 1,090
Adjustment Factor
Proportional Gross $ 555 $ 601 $ 1,597 $ 1,943
Margin(10)
Adjusted earnings per share (a non-GAAP financial measure) is defined as
diluted earnings per share from continuing operations excluding gains or
losses of the consolidated entity due to (a) mark-to-market amounts
related to FAS 133 derivative transactions, (b) unrealized foreign
currency gains or losses, (c) significant gains or losses due to
dispositions and acquisitions of business interests, (d) significant
losses due to impairments, and (e) costs due to the early retirement of
debt. AES believes that adjusted earnings per share better reflects the
(1) 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 mark-to-market gains or
losses related to derivative transactions, currency gains or losses,
losses due to impairments and strategic decisions to dispose or acquire
business interests or retired debt which affect results in a given period
or periods. Adjusted earnings per share should not be construed as an
alternative to earnings per share, which is determined in accordance with
GAAP.
Amount includes: Hefei gain on sale of $15 million or $0.02 net of
(2) noncontrolling interest and tax associated with the shut down of Hefei
plant in China.
Amount includes: Kazakhstan net gain of $98 million or $0.15 related to
(3) the termination of a management agreement as well as a net gain of $13
million or $0.02 in March related to the reversal of withholding tax
contingency. There is no tax impact associated with the Kazakhstan gains.
(4) Amount includes: A nontaxable net gain on Kazakhstan sale of $908 million
or $1.31.
Amount includes: South African Peakers development cost write-off of $11
(5) million or $0.02. There is no tax benefit associated with these
impairments.
Amount includes: An impairment of the Company's investment in coal to gas
(6) technology of $10 million or $0.02. There is no tax benefit associated
with the coal to gas technology project impairment.
Amount includes: South African Peakers development cost write-off of $31
(7) million ($29 million net of tax or $0.04) and Uruguaiana impairment of $36
million ($17 million net of noncontrolling interest or $0.03). There is no
tax benefit associated with the Uruguaiana impairment.
Amount includes: $55 million ($34 million net of tax or $0.05) loss on the
retirement of Corporate debt, $131 million or $0.19 tax impact on
(8) repatriation of a portion of the Kazakhstan sale proceeds that were used
to fund the early retirement of corporate debt, and $14 million ($9
million net of tax or $0.01) of debt refinancing at IPALCO in Q2 2008.
Free cash flow (a non-GAAP financial measure) is defined as net cash from
operating activities less maintenance capital expenditures (including
environmental capital expenditures). AES believes that free cash flow is a
useful measure for evaluating our financial condition because it
(9) represents the amount of cash provided by operations, less maintenance
capital expenditures as defined by our businesses, that may be available
for investing or repaying debt. Free cash flow should not be construed as
an alternative to net cash from operating activities, which is determined
in accordance with GAAP.
(10) See Footnote (2) on Guidance Elements for definition of Proportional
financial metrics.
The AES Corporation
Parent Financial Information (unaudited)
Parent only data: last four quarters
($ in millions) 4 Quarters Ended
Sept. 30, June 30, Mar. 31, Dec. 31,
Total subsidiary distributions & 2009 2009 2009 2008
returns of capital to Parent
Actual Actual Actual Actual
Subsidiary distributions(1) to Parent & $ 1,345 $ 1,327 $ 1,069 $ 1,060
QHCs
Returns of capital distributions to 200 89 169 150
Parent & QHCs
Total subsidiary distributions & $ 1,545 $ 1,416 $ 1,238 $ 1,210
returns of capital to Parent
Parent only data: quarterly
($ in millions) Quarter Ended
Sept. 30, June 30, Mar. 31, Dec. 31,
Total subsidiary distributions & 2009 2009 2009 2008
returns of capital to Parent
Actual Actual Actual Actual
Subsidiary distributions(1) to Parent & $ 202 $ 527 $ 230 $ 386
QHCs
Returns of capital distributions to 134 1 20 45
Parent & QHCs
Total subsidiary distributions & $ 336 $ 528 $ 250 $ 431
returns of capital to Parent
Parent Company Liquidity(2) Balance at
($ in millions) Sept. 30, June 30, Mar. 31, Dec. 31,
2009 2009 2009 2008
Actual Actual Actual Actual
Cash at Parent & Cash at QHCs(3) $ 707 $ 603 $ 168 $ 247
Availability under revolver 701 713 1,182 1,143
Ending liquidity $ 1,408 $ 1,316 $ 1,350 $ 1,390
(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 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 availability under corporate credit facilities plus cash at qualifying 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's 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
2009 REVISED FINANCIAL GUIDANCE ELEMENTS(1)
Proportional
Consolidated Adjustment Factors Proportional
(2)
Income Statement
Elements
Gross Margin $3,550 to 3,650 $1,450 to 1,500 $2,100 to 2,150
million million million
Diluted Earnings
Per Share From $1.20 to 1.24
Continuing
Operations
Adjusted Earnings
Per Share Factors ($0.13)
(3),(4)
Adjusted Earnings $1.07 to 1.11
Per Share(3),(4)
Cash Flow Elements
Net Cash From $2,100 to 2,200 $1,300 to 1,350
Operating million $800 to 850 million million
Activities
Operational $550 to 600
Capital million $150 to 175 million $400 to 425 million
Expenditures (a)
Environmental
Capital $50 to 100 million $0 to 25 million $50 to 75 million
Expenditures (b)
Maintenance
Capital $600 to 700 $150 to 200 million $450 to 500 million
Expenditures (a + million
b)
Growth Capital $2,000 to 2,100 $625 to 675 million $1,500 to 1,600
Expenditures million million
Free Cash Flow (5) $1,450 to 1,550 $625 to 675 million $825 to 875 million
million
Subsidiary $1,200 to 1,300
Distributions(6) million
Reconciliation of
Free Cash Flow
Net Cash from $2,100 to 2,200 $1,300 to 1,350
Operating million $800 to 850 million million
Activities
Less: Maintenance $600 to 700
Capital million $150 to 200 million $450 to 500 million
Expenditures
Free Cash Flow (5) $1,450 to 1,550 $625 to 675 million $825 to 875 million
million
(1)2009 Revised Guidance is based on expectations for future foreign exchange rates and commodity prices as of September 30, 2009. (2) The AES Corporation (the "Company") 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. Accordingly, the Company has presented certain financial metrics which are defined as Proportional (a non-GAAP financial measure). Proportional metrics present the Company's estimate of its share in the economics of the underlying metric. The Company believes that the Proportional metrics are useful to investors because they exclude the economic share in the metric presented that is held by non-AES shareholders. For example, Operating Cash Flow is a GAAP metric which presents the Company's cash flow from operations on a consolidated basis, including operating cash flow allocable to noncontrolling interests. Proportional Operating Cash Flow removes the share of operating cash flow allocable to noncontrolling interests and therefore may act as an aid in the valuation of the Company. Proportional measures are considered in the Company's internal evaluation of financial performance. Proportional metrics are reconciled to the nearest GAAP measure. Certain assumptions have been made to estimate our proportional financial measures. These assumptions include: (i) the Company's economic interest has been calculated based on a blended rate for each consolidated business when such business represents multiple legal entities; (ii) the Company's economic interest may differ from the percentage implied by the recorded net income or loss attributable to noncontrolling interests or dividends paid during a given period; (iii) the Company's economic interest for entities accounted for using the hypothetical liquidation at book value method is 100%; (iv) individual operating performance of the Company's equity method investments is not reflected and (v) all intercompany amounts have been excluded as applicable. (3)Non-GAAP financial measure as reconciled in the table. Effective January 1, 2009, the Company now includes all unrealized foreign currency gains or losses in its definition of adjusted earnings per share. As a result of this change, full year 2008 adjusted earnings per share would increase by $0.13 from $0.99 to $1.12. (4) Adjustment factors include $0.13 of addbacks related primarily to estimated unrealized foreign currency and FAS 133 derivative losses as well as a ($0.15) gain on sale related to Northern Kazakhstan businesses (5) Free Cash Flow is reconciled above. See Footnote (9) on Non-GAAP Financial Measures for definition. (6) See Footnote (1) on Parent Financial Information for definition.
Source: The AES Corporation
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