The Aes Corporation · NYSE:AES
The Aes — Investor Presentation (March 2015)
45 slides from The Aes's investor presentation, March 2015
Slide 1: The AES Corporation
The AES Corporation March 2015
Slide 2: Safe Harbor Disclosure
Safe Harbor Disclosure Certain statements in the following presentation regarding AES’ business operations may constitute “forward-looking statements.” Such forward-looking statements include, but are not limited to, those related to future earnings growth and financial and operating performance. Fo
Slide 3: Value Proposition
Value Proposition l AES is trading at a discount relative to the utilities sector, despite comparable total return Certain factors, including the global macro environment, poor hydrology and Maritza negotiations are weighing on the stock Valuation comparison for European, U.S. utilities and Y
Slide 4: Who We Are: Executive Leadership Team
Who We Are: Executive Leadership Team Andrés Gluski Tom O’Flynn Bernerd Da Santos President & Executive Vice President & Chief Operating Officer & Chief Executive Officer Chief Financial Officer Senior Vice President Michael Chilton Elizabeth Hackenson Tish Mendoza Brian Miller Senior Vice President
Slide 5: Who We Are: Our Mission
Who We Are: Our Mission Improving lives by providing safe, reliable and sustainable energy solutions in every market we serve Contains Forward-Looking Statements 5
Slide 6: Who We Are: Our Business
Who We Are: Our Business Leveraging our electricity platforms and knowledge to provide energy and infrastructure solutions Contains Forward-Looking Statements 6
Slide 7: Who We Are: Businesses Managed in Six Strategic Business Units
Who We Are: Businesses Managed in Six Strategic Business Units (SBUs) US ANDES BRAZIL MCAC Europe ASIA Bulgaria Jordan Netherlands UK Kazakhstan United States Dominican Republic Vietnam Mexico Puerto Rico India El Salvador Philippines Panama Colombia Sri Lanka Brazil Chile Argentina Contains Forward
Slide 8: Who We Are: 34,732 MW in Operation
Who We Are: 34,732 MW in Operation Fuel Type SBU Oil, Diesel & Pet Coke 4% Asia 5% Renewables1 Europe 19% 33% Gas 36% 24% US MCAC 9% 9% Brazil 38% 23% Coal Andes 1. Renewables includes: hydro, wind, energy storage, biomass and landfill gas. Contains Forward-Looking Statements 8
Slide 9: Who We Are: A Diversified Power Generation and Distribution Company
Who We Are: A Diversified Power Generation and Distribution Company $ in Millions; $1.9 Billion Before Corporate Charges of $0.5 Billion Europe/Asia 2% 21% Asia US Europe 24% 19% Andes MCAC 23% 19% Americas 79% Brazil 13% 1. A non-GAAP financial measure. See Appendix for definition and reconciliatio
Slide 10: Who We Are: 82% of Portfolio Businesses are Contracted or Utilities
Who We Are: 82% of Portfolio Businesses are Contracted or Utilities 2015 Adjusted PTC1 by Contract Type Short-Term Sales (< 2 Years) Utilities 18% 18% Medium-Term 24% Contract Sales Long-Term (2-5 Years) 40% Contract Sales (5-25 Years) Average Remaining Contract Term is 7 Years2 1. A non-GAAP financ
Slide 11: Reducing Complexity: Since September 2011, Exited 10 Countries
Reducing Complexity: Since September 2011, Exited 10 Countries $ in Millions $3 Billion in Equity Proceeds from Asset Sales1 $1,842 $2,976 $234 $900 2011-2012 2013 2014 Total 1. See Slide 38 for details. Contains Forward-Looking Statements 11
Slide 12: Performance Excellence: Improving Efficiencies Across Our Portfolio
Performance Excellence: Improving Efficiencies Across Our Portfolio $ in Millions Achieved Reduction of $200 in Global Overhead1 One Year Early $57 $200 $53 $90 2012 Actual 2013 Actual 2014 Actual Total Going Forward, Focusing on Additional Cost Savings Initiatives, Including O&M Reductions 1. Cost
Slide 13: Expanding Access to Capital: Partnerships at the Project and Business Level
Expanding Access to Capital: Partnerships at the Project and Business Level $ in Millions $1,850 $2,4591 $609 2013 2014 Total Objective: Optimize Our Exposure, Improve Returns and Free-Up Capital 1. See Slide 39 for details. Contains Forward-Looking Statements 13
Slide 14: Leveraging Our Platforms: Already Funded 70% of $1.5 Billion in Equity Commitments
Leveraging Our Platforms: Already Funded 70% of $1.5 Billion in Equity Commitments for Projects Under Construction 7,141 MW Under Construction Yield More Than 15% ROE1 1,851 793 Asia 36% 43% US 2,400 1,525 572 MCAC 3% 18% 2015 2016 2017 2018 Andes New Capacity Under Construction IPL MATS 1. Based on
Slide 15: Leveraging Our Platforms: Energy Storage & Distributed Energy
Leveraging Our Platforms: Energy Storage & Distributed Energy Provide Additional Growth Opportunities Energy Storage Distributed Energy l The most comprehensive and accomplished l Positioned to capitalize on emerging fleet of battery-based energy storage in the opportunities in distributed solar P
Slide 16: Invested $3.7 Billion of Discretionary Cash in Shareholder Returns, Debt Paydown and Growth
Invested $3.7 Billion of Discretionary Cash in Shareholder Returns, Debt Paydown and Select Growth Projects September 2011-December 2014; $ in Millions Share Buyback: 78 million shares at $12.69 Per Share $984 Debt Prepayment and $1,603 Refinancing $293 Shareholder Dividend $828 Investments in Subsi
Slide 17: Taking Proactive Steps to Address Various Challenges: 2015 Adjusted EPS Guidance
Taking Proactive Steps to Address Various Challenges: 2015 Adjusted EPS1 Guidance Range of $1.25-$1.35 $1.30-$1.40 $1.25-$1.35 $0.04 $0.02 $0.03 $0.04 ($0.10) ($0.05) ($0.03) 2015 Guidance as of Currency/Commodity Currency/Commodity Brazil Hydro Other Factors, Revenue Capital Allocation Tax Opportun
Slide 18: Adjusted EPS Growth Drivers
Adjusted EPS1 Growth Drivers 6%-8% Average Expect Flat Annual Growth, More $1.25-$1.35 to Modest Growth Weighted Toward 2018 + Performance improvement + Completion of Mong Duong 2 + Completion of and Panama barge + Capital allocation 572 MW Cochrane project + 2017: Completion of 793 MW + Full year o
Slide 19: 2015 Proportional Free Cash Flow Guidance
2015 Proportional Free Cash Flow1 Guidance: Recovery of Working Capital/Receivables & New Businesses Drive Growth $ in Millions $1,000-$1,350 $1,271 $60 $24 $200 $891 ● Asia ● MCAC ● Europe ● Brazil ● Andes 2013 2014 Recovery of New Businesses Other 2015 Guidance Working Capital Coming On-Line and R
Slide 20: Beyond 2015, Proportional Free Cash Flow Growth Driven by Projects Under Construction
Beyond 2015, Proportional Free Cash Flow1 Growth Largely Driven by Projects Under Construction Coming On-Line $ in Millions 2016-2018 10%-15% Average Annual Growth $1,000-$1,350 + 5,616 MW of projects under construction on-line 2016-2018 + Full year of operations from 1,525 MW of projects on-line in
Slide 21: Investment of $3.5 Billion of Discretionary Cash Will Increase Shareholder Value
Investment of $3.5 Billion1 of Discretionary Cash Will Increase Shareholder Value 2015-2018; $ in Millions Committed Investments in Projects Under Construction Credit Neutral $390 $200 Debt Prepayment3 Discretionary Cash to be Allocated ● Buyback (current $1,750 authorization $400 million) ● Increme
Slide 22: Value Proposition
Value Proposition l We have taken significant steps to mitigate the impact of these factors on our earnings Reduced 2015 Adjusted EPS1 guidance by $0.05, despite $0.18 of headwinds; maintained cash flow and long-term growth rates l Management track record of successful execution Reducing ris
Slide 23: Appendix
Appendix l Valuation Slides 24-26 l Hydrology Impact on Adjusted EPS1 Slide 27 l Executive Compensation Slide 28 l 2015 Adjusted PTC1 Modeling Ranges Slide 29 l Key Assumptions for 2015 Guidance Slide 30 l 2015 Guidance Estimated Sensitivities Slide 31 l Currency and Commodities Slides 32-33
Slide 24: AES vs. European Utilities
AES vs. European Utilities Current As of March 6, 2015 Dividend Yield LT Growth Rate Total Return P/E (2015) Credit Rating AES 3.3% 5%1 ~8% 9.5x BB- E.On 3.6% -1.9% 1.7% 16.7x A- Enel 4.0% 0.3% 4.3% 12.7x BBB GDF 5.3% 5.8% 11.1% 14.8x A Iberdrola 4.6% 5.7% 10.3% 15.8x BBB National Grid 5.0% 3.4% 8.4
Slide 25: AES vs. U.S. Utilities
AES vs. U.S. Utilities Current As of March 6, 2015 Dividend Yield LT Growth Rate Total Return P/E (2015) Credit Rating AES 3.3% 5%1 ~8% 9.5x BB- Dominion 3.7% 6.4% 10.3% 18.8x A- Duke 4.3% 4.9% 9.1% 15.9x BBB+ NextEra 3.1% 6.4% 9.5% 17.5 A- PPL 4.8% 3.7% 8.5% 13.9x BBB Sempra 2.6% 7.6% 10.2% 22.1x B
Slide 26: AES vs. YieldCos
AES vs. YieldCos Current Free Cash EV/EBITDA As of March 6, 2015 Dividend Yield Flow Growth1 P/E (2015) (2015) Credit Rating AES 3.3% 10%-15% 9.5x ~7x BB- Abengoa Yield 5% Low double-digit 26.2x 12.6x NextEra Energy Partners 2.8% 12%-15% 33.6x 13.6x NRG Yield 3.4% 15%-18% 21.9x 10.8x BB+ Pattern Ene
Slide 27: Hydro Conditions Improving Except in Brazil
Hydro Conditions Improving Except in Brazil Colombia, Chile & Argentina Panama Brazil TOTAL ● Chivor in Colombia ● Inflows have ● Expect 2015 hydro had stronger inflows improved to ~100% conditions to be versus the rest of the of long-term average worse than 2014 country, leading to favorable short-
Slide 28: Executive Compensation Aligned with Shareholders' Interests
Executive Compensation Aligned with Shareholders’ Interests Compensation1 Key Factors Restricted Stock Units 12% Vests over 3 years Stock Options 17% Vests over 3 years 80% Variable Vests over 3 years EBITDA less Maintenance & 29% 50% Environmental CapEx (3-Year Average) Performance Stock Units Tota
Slide 29: Full Year 2015 Adjusted PTC Modeling Ranges
Full Year 2015 Adjusted PTC1 Modeling Ranges $ in Millions Prior 2015 Adjusted Current 2015 PTC1 Modeling Adjusted PTC1 SBU Range2 (Provided Modeling Range2 Drivers of Growth Versus 2014 11/6/14) (Provided 2/26/15) + Lower outages US $450-$490 $450-$490 - Continued transition to market prices at DPL
Slide 30: Key Assumptions for 2015 Guidance
Key Assumptions for 2015 Guidance l No rationing in Brazil l Currency and commodity forward curves as of December 31, 2014 l 31% to 33% effective tax rate, which assumes that the CFC look- through rule is extended If not extended, the impact could be negative $0.04-$0.06 on Adjusted EPS1, with
Slide 31: 2015 Guidance Estimated Sensitivities
2015 Guidance Estimated Sensitivities Interest Rates1 l 100 bps move in interest rates over FY 2015 is equal to a change in EPS of approximately $0.03 10% appreciation in USD against the following 2015 key currencies is equal to the following negative EPS impacts: Average Rate Sensitivity Argentine
Slide 32: 2015 Foreign Exchange Risk Mitigated Through Structuring and Hedging
2015 Foreign Exchange (FX) Risk Mitigated Through Structuring of Our Businesses and Active Hedging 2015 Adjusted PTC1 2015 Full Year FX Sensitivity2,3 by Currency by SBU (Cents Per Share) KZT Other FX GBP 4% 1% EUR 2% 7% COP 1.0 6% 1.0 0.5 BRL USD- 11% 0.0 Equivalent 2.0 69% 1.5 1.5 1.0 US Andes Bra
Slide 33: Commodity Exposure is Largely Hedged Through 2016
Commodity Exposure is Largely Hedged Through 2016, Long on Natural Gas and Oil in Medium- to Long-Term Full Year 2017 Adjusted EPS1 Commodity Sensitivity2 for 10% Change in Commodity Prices 4.0 2.0 Cents Per Share 0.0 Coal Gas Oil PJM AD Hub (2.0) (4.0) (6.0) l Mostly hedged through 2016, more open
Slide 34: 2015 Parent Capital Allocation Plan
2015 Parent Capital Allocation Plan $ in Millions Discretionary Cash – Sources Discretionary Cash – Uses ($1,440-$1,540) ($1,440-$1,540) Target Closing Debt Prepayment4 $100 $1,440- Cash Balance $475-$575 $1,540 $200 Discretionary Cash to be $458 Allocated Committed Investments in $314 $520- ● Buyba
Slide 35: Attractive Returns from 2015-2018 Construction Pipeline
Attractive Returns from 2015-2018 Construction Pipeline $ in Millions, Unless Otherwise Stated Gross Expected Total AES Project Country AES Ownership Fuel MW COD Total Capex Equity ROE Comments Construction Projects Coming On-Line 2014-2018 Tunjita Colombia 71% Hydro 20 1H 2015 $67 $21 Lease capital
Slide 36: DPL Inc. Modeling Disclosures
DPL Inc. Modeling Disclosures Based on Market Conditions and Hedged Position as of December 31, 2014 Full Year 2015 Full Year 2016 Full Year 2017 Volume Production (TWh) 14 14 13 % Volume Hedged ~67% ~35% ~9% EBITDA Generation Business1,2 ($ in Millions) $100 to $110 per year EBITDA DPL Inc. includi
Slide 37: Non-Recourse Debt at DP&L and DPL Inc.
Non-Recourse Debt at DP&L and DPL Inc. $ in Millions Amount Outstanding as Series Interest Rate Maturity of December 31, 2014 Remarks 2013 First Mortgage Bonds 1.875% September 2016 $445.0 ● Callable at make-whole T+20 2006 OH Air Quality Pollution Control 4.8% September 2036 $100.0 ● Non-callable;
Slide 38: Reducing Complexity: Since September 2011, Exited 10 Countries
Reducing Complexity: Since September 2011, Exited 10 Countries $ in Millions Proceeds to AES Business Country Remarks September 2011- December 2012 2013 2014 Total Atimus (Telecom) Brazil $284 $284 Non-core asset; Paid down $197 million1 in debt at Brasiliana subsidiary Bohemia Czech Republic $12 $1
Slide 39: Expanding Access to Capital: Strategic Partners Have Invested $2.5 Billion
Expanding Access to Capital: Strategic Partners Have Invested $2.5 Billion in Our Subsidiaries $ in Millions Business Country Strategic Partner 2013 2014 Mitsubishi Cochrane Chile Corporation $145 Antofagasta Alto Maipo Chile Minerals $361 Silver Ridge Power (Solar) Various Google $103 Global Infras
Slide 40: Reconciliation of Full Year Adjusted PTC & Adjusted EPS
Reconciliation of Full Year Adjusted PTC1 & Adjusted EPS1 FY 2014 FY 2013 Per Share Per Share $ in Millions, Except Per Share Amounts (Diluted) Net (Diluted) Net Net of NCI2 of NCI2 and Net of NCI2 of NCI2 and Tax Tax Loss (Income) from Continuing Operations Attributable to AES and Diluted EPS $789
Slide 41: Reconciliation of Full Year Capex and Free Cash Flow
Reconciliation of Full Year Capex and Free Cash Flow1 Consolidated Full Year $ in Millions 2014 2013 Operational Capex (a) $666 $760 Environmental Capex (b) $241 $211 Maintenance Capex (a + b) $907 $971 Growth Capex (c) $1,637 $1,608 Total Capex2 (a + b + c) $2,544 $2,579 Consolidated Full Year Prop
Slide 42: Reconciliation of 2015 Guidance
Reconciliation of 2015 Guidance $ in Millions, Except Per Share Amounts 2015 Guidance Adjusted EPS1 $1.25-$1.35 Proportional Free Cash Flow1 $1,000-$1,350 Consolidated Net Cash Provided by Operating $1,900-$2,700 Activities Reconciliation Consolidated Adjustment Factor Proportional Consolidated Net
Slide 43: Assumptions
Assumptions Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: (a) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; (b) businesses continue to operate in a manner consistent
Slide 44: Definitions
Definitions l Adjusted Earnings Per Share (a non-GAAP financial measure) is defined as diluted earnings per share from continuing operations excluding gains or losses of both consolidated entities and entities accounted for under the equity method due to (a) unrealized gains or losses related to de
Slide 45: Definitions (Continued)
Definitions (Continued) l Proportional Metrics – The Company is a holding company that derives its income and cash flows from the activities of its subsidiaries, some of which are not wholly-owned by the Company. Accordingly, the Company has presented certain financial metrics which are defined as