Slide 1: Second Quarter 2020 Financial Review
August 6, 2020 The AES Corporation Second Quarter 2020 Financial Review
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. Forw
Slide 3: Highlights
Highlights l Resilient business model with predominantly long-term contracts l Reaffirming guidance and expectations for 2020, and 7%-9% average annual growth in Adjusted EPS1 and Parent Free Cash Flow1 through 2022 l On track to attain a second investment grade rating by year-end 2020 l Achieved ke
Slide 4: Transforming Business Mix, Delivering Double-Digit Total Return
Transforming Business Mix, While Delivering a Double-Digit Total Return1 Making Substantial Progress Toward Reducing Generation (MWh) from Coal2 45% 34% <30% <10% Year-End 2019 August 5, 2020 Year-End 2020 Year-End 2030 1. 7% to 9% average annual growth in Adjusted EPS through 2022, plus ~3% dividen
Slide 5: 1.5 GW of Renewables Awarded or Signed Under Long-Term PPAs YTD 2020
Sustainable Growth: 1.5 GW of Renewables Awarded or Signed Under Long-Term PPAs in YTD 2020 Technology Geography Energy Storage MCAC 12% 23% Solar 38% US 36% 41% 50% South Wind America 5 Contains Forward-Looking Statements
Slide 6: Sustainable Growth: 6.2 GW Backlog of Renewables
Sustainable Growth: 6.2 GW Backlog of Renewables Under Awarded Construction1 7% 9% Hydro 13% Energy Storage 34% 40% Wind 59% 38% Solar Signed PPAs 1. As of June 30, 2020. 6 Contains Forward-Looking Statements
Slide 7: Increasing Ownership in 3.7 GW of Renewables at AES Tietê
Increasing Ownership in 3.7 GW of Renewables at AES Tietê l Purchasing an 18.5% interest in AES Tietê, increasing ownership to 43% Funding majority of $250 million purchase price through debt capacity in Brazil Expected to be $0.01 to $0.02 accretive to annual earnings per share beginning in 202
Slide 8: Fluence is a Globally Recognized Brand in Energy Storage
Leadership in Innovation: Fluence is a Globally Recognized and Trusted Brand in Energy Storage with a Demonstrated Track Record AES + Siemens 2.1 GW Established Channel Deployed or Awarded Partners (Global Market Leader) 22 Countries & ~$1 Billion Territories De-risked Contracted Global Presence Sal
Slide 9: Fluence Sixth-Generation Energy Storage Technology
Leadership in Innovation: Fluence Sixth-Generation Simple, Safe, Scalable Energy Storage Technology l Fluence’s standardized technology stack makes it easier to rapidly and cost-effectively deploy energy storage without sacrificing quality and configurability Fast procurement and contracting proce
Slide 10: Leadership in Innovation: Virtual Reservoir
Leadership in Innovation: Virtual Reservoir l Virtual reservoir for run-of-the-river hydropower projects, utilizing battery-based energy storage Charge when power prices are low, and then discharge in peak hours l Commissioned the world’s first virtual reservoir, with 10 MW, or 50 MWh, of energy s
Slide 11: Recent Investment in 5B, a Prefabricated Solar Provider
Leadership in Innovation: Recent Investment in 5B, a Prefabricated Solar Solution Provider l Patented technology allows for solar projects to be installed up to three times faster using half the land l Expect to utilize 5B’s technology in select projects across our pipeline to speed up delivery time
Slide 12: Uplight Provides Utilities with Digital Solutions
Leadership in Innovation: Uplight Provides Utilities with a Suite of Digital Solutions l Works with more than 80 electric and gas utilities l Reaches more than 100 million households and businesses in the US l Expect growth of 20% in 2020 12 Contains Forward-Looking Statements
Slide 13: Q2 2020 Financial Review
Q2 2020 Financial Review l Resilient business model l Q2 2020 results l Parent capital allocation plans 13 Contains Forward-Looking Statements
Slide 14: 85% of Adjusted PTC From Long-Term Contracted Generation and Utilities
Resilient Business Model: 85% of Adjusted PTC1 From Long-Term Contracted Generation and Utilities Percent of AES’ Adjusted PTC1 Utilities 15% Short-Term Contracted 15% Generation2 70% Long-Term Contracted Generation2 Average Remaining Contract Life of 14 Years 1. A non-GAAP financial measure. See Ap
Slide 15: Limited Exposure to Fluctuations in Foreign Currency
Resilient Business Model: Limited Exposure to Fluctuations in Foreign Currency 2020-2022 Cumulative Exposure Annualized Impact1 of 10% USD Appreciation Composition by Currency on Adjusted PTC2 After Hedging $ in Millions Euro (EUR) ($8.0) Argentine Peso (ARS) ($8.0) EUR, 6% Brazilian Real (BRL) ($2.
Slide 16: Less Sensitive to Demand Due to Take-or-Pay Contracts
Resilient Business Model: Less Sensitive to Fluctuations in Demand Due to Take-or-Pay Contract Structures 2020 Ownership-Adjusted Variable Margin From Latin America1 (Revenue Less Fuel Cost) Contracted with Limited l Volumetric risk significantly reduced Volumetric Risk due to: Take-or-pay contrac
Slide 17: ~60% of Variable Margin From Investment Grade Customers
Resilient Business Model: ~60% of Variable Margin Comes From Investment Grade Profile Customers 2020 Ownership-Adjusted Variable Margin From Latin America1 (Revenue Less Fuel Cost) Latin America1 Non-Investment Grade 62% 75% 25% 34% 4% Investment Grade or Equivalent Non-Investment Grade Not Rated 3
Slide 18: Receivables Remain Stable
Resilient Business Model: Receivables Remain Stable Receivables Balance ($ in Millions) $1,663 $1,624 $1,593 Q4 2019 Q1 2020 Q2 2020 Receivables and Days Sales Outstanding in Line with 45-60 Day Standard Allowed Grace Period 18 Contains Forward-Looking Statements
Slide 19: Impact of COVID-19 on System Demand Less Than Projected
During Q2 2020, Impact of COVID-19 on System Demand Less Than Projected l Despite decline in market demand, AES generation businesses have been largely unaffected due to take-or-pay nature of contracts and customers being deemed essential l Impact from volumetric risk on AES is primarily at utilitie
Slide 20: Q2 2020 Adjusted EPS Decreased $0.01
Q2 2020 Adjusted EPS1 Decreased $0.01 $0.26 $0.01 $0.25 $0.03 ($0.02) ($0.03) − Lower − Regulatory + Higher + Cost savings demand at changes at contributions + Lower interest utilities DP&L and from South expense Argentina in America and 2019 Eurasia Q2 2019 Demand Regulatory SBUs Cost Savings Q2 20
Slide 21: Q2 Financial Results
Q2 Financial Results $ in Millions l Relatively flat Adjusted PTC1 Adjusted PTC1 driven primarily by: Lower contributions from US and -$2 Utilities l Largely offset by: $240 $238 Higher contributions from South America and Eurasia; and Lower Parent interest and G&A expenses Q2 2019 Q2 2020 1.
Slide 22: Q2 Financial Results: US & Utilities SBU
Q2 Financial Results: US & Utilities SBU $ in Millions l Lower Adjusted PTC1 Adjusted PTC1 driven primarily by: Lower regulated retail margin at DP&L implemented in Q4 2019; Lower demand at utilities due to the impact of COVID-19; and Capacity reduction due to retirements of units at Southland
Slide 23: Q2 Financial Results: South America SBU
Q2 Financial Results: South America SBU $ in Millions l Higher Adjusted PTC1 Adjusted PTC1 driven primarily by higher contributions from AES Gener, including better operating performance at Guacolda and recovery of previously expensed payments from customers in Chile +$34 $140 $106 Q2 2019 Q2 2020 1
Slide 24: Q2 Financial Results: MCAC SBU
Q2 Financial Results: MCAC SBU $ in Millions l Higher Adjusted PTC1 Adjusted PTC1 driven primarily by improved availability and hydrology in Panama l Partially offset by outage- related insurance proceeds in the Dominican Republic in 2019 +$3 $63 $66 Q2 2019 Q2 2020 1. A non-GAAP financial measure.
Slide 25: Q2 Financial Results: Eurasia SBU
Q2 Financial Results: Eurasia SBU $ in Millions l Higher Adjusted PTC1 Adjusted PTC1 driven primarily by: Improved operational performance in Vietnam; and Impact of sold businesses in the United Kingdom in 2019 +$10 $39 $49 Q2 2019 Q2 2020 1. A non-GAAP financial measure. See Appendix for defini
Slide 26: Reaffirming 2020 Adjusted EPS Guidance
Reaffirming 2020 Adjusted EPS1 Guidance Adjusted EPS1 l Reaffirming 2020 Adjusted EPS1 guidance range of $1.32- $1.32-$1.42 $1.36 $1.42 l Performance in 2H 2020 will benefit from: Contributions from construction projects, including 1.3 GW Southland repowering project and 1 GW of renewables; Cost
Slide 27: Reduced Debt and Growing Free Cash Support Investment Grade Rating
Significantly Reduced Debt and Growing Free Cash Support Investment Grade Rating Trailing Twelve Months (TTM) Parent Free Cash Flow/Net Debt 24.2% 22%-24% 21.5% 20.1% Minimum Threshold 18.9% 20% Q4 2018 Q4 2019 Q1 2020 Q2 2020 Expected Q4-FY 2020 Minimum Threshold for Investment Grade Rating TTM Par
Slide 28: $3.5 Billion in Liquidity
$3.5 Billion in Liquidity $ in Millions $3,527 $2,918 $1,295 $777 $2,141 $2,232 $609 $518 $91 Corp SBUs Total Cash Balance1 Committed Credit Lines Note: As of June 30, 2020. 1. Includes cash and cash equivalents, restricted cash, short-term investments and debt service reserves and other deposits. 2
Slide 29: $2 Billion of Refinancing Executed in Q2 2020
$2 Billion of Refinancing Executed in Q2 2020 Extended Maturities and Reduced Interest Costs l $1.6 billion AES Corp. investment grade secured issuance Refinanced near-term maturities Blended coupon of 3.6% (90 bps improvement) Annual interest savings of more than $10 million l DPL, Inc. refin
Slide 30: 2020 Parent Capital Allocation Plan
2020 Parent Capital Allocation Plan $ in Millions Discretionary Cash – Sources Discretionary Cash – Uses ($1,348-$1,398) ($1,348-$1,398) Revolver Repayment To be Allocated $725- $1,348- $0- $775 $1,398 Shareholder $87- Dividend $180 $317 $381 $60 $550 $700 $13 Investments Beginning Asset Sales1 Retu
Slide 31: 2020-2022: $3.4 Billion of Discretionary Cash Generation
2020-2022: $3.4 Billion of Discretionary Cash Generation $ in Millions $2,472 $3,445 $900 $60 $13 2020 Beginning Asset Sales Return of Capital Parent FCF 1 Total Cash 1. A non-GAAP financial measure. See Appendix for definition. For illustrative purposes, Parent Free Cash Flow assumes the low end of
Slide 32: 2020-2022: $3.4 Billion of Discretionary Cash Available for Allocation
2020-2022: $3.4 Billion of Discretionary Cash Available for Allocation $ in Millions Revolver Repayment $180 $165 Unallocated Investments in Subsidiaries ● Backlog & Projected Shareholder Dividend1 $1,200 $1,900 PPAs ● IPL T&D ● Vietnam LNG ● AES Gener ● DP&L Infrastructure Delivering Value by Alloc
Slide 33: Key Takeaways
Key Takeaways l Remain confident in: Achieving 2020 guidance and growth rates through 2022 Attaining a second investment grade rating from S&P before year- end Realizing decarbonization goals by the end of the year 33 Contains Forward-Looking Statements
Slide 34: Appendix
Appendix l Parent Only Cash Flow & Liquidity Slides 35-37 l Q2 & YTD Adjusted EPS1 Roll-Up Slide 38 l YTD Adjusted EPS1 and Adjusted PTC1 Slides 39-44 l Listed Subs & Public Filers Slide 45 l SBU Modeling Disclosures Slides 46-47 l 2020 Guidance & Expectations Through 2022 Slides 48-49 l 2020 Adjust
Slide 35: Parent Sources and Uses of Liquidity
Parent Sources and Uses of Liquidity Q2 YTD $ in Millions 2020 2019 2020 2019 Sources Total Subsidiary Distributions1 $401 $269 $590 $469 Proceeds from Asset Sales, Net - $113 - $113 Financing Proceeds, Net $1,579 - $1,579 - Increased/(Decreased) Credit Facility Commitments - - - - Issuance of Commo
Slide 36: Q2 & YTD 2020 Subsidiary Distributions
Q2 & YTD 2020 Subsidiary Distributions1 $ in Millions Subsidiary Distributions1 by SBU Q2 2020 YTD 2020 US & Utilities $119 $250 South America $34 $36 MCAC $55 $69 Eurasia $169 $201 Corporate & Other2 $24 $34 Total $401 $590 Top Ten Subsidiary Distributions1 by Business Q2 2020 YTD 2020 Business Amo
Slide 37: Reconciliation of Subsidiary Distributions and Parent Liquidity
Reconciliation of Subsidiary Distributions1 and Parent Liquidity1 $ in Millions Quarter Ended June 30, March 31, December 31, September 30, 2020 2020 2019 2019 Total Subsidiary Distributions1 to Parent & QHCs2 $401 $189 $396 $326 Total Return of Capital Distributions to Parent & QHCs2 $163 - $19 $19
Slide 38: Q2 & YTD Adjusted EPS Roll-Up
Q2 & YTD Adjusted EPS1 Roll-Up $ in Millions, Except Per Share Amounts Q2 2020 Q2 2019 Variance YTD 2020 YTD 2019 Variance Adjusted PTC1 US & Utilities $57 $118 ($61) $128 $240 ($112) South America $140 $106 $34 $259 $221 $38 MCAC $66 $63 $3 $144 $113 $31 Eurasia $49 $39 $10 $93 $95 ($2) Total SBUs
Slide 39: YTD 2020 Adjusted EPS Increased $0.01
YTD 2020 Adjusted EPS1 Increased $0.01 $0.53 $0.03 $0.54 $0.02 $0.03 ($0.03) ($0.04) − Lower − Regulatory + Higher + Cost YTD 2019: 30% demand at changes at contributions savings YTD 2020: 26% utilities DPL and from South + Lower Argentina America and interest in 2019 MCAC expense YTD 2019 Demand Re
Slide 40: YTD Financial Results
YTD Financial Results $ in Millions l Lower Adjusted PTC1 Adjusted PTC1 driven primarily by lower contributions from US and -$24 Utilities l Partially offset by: $512 Higher contributions from South $488 America and MCAC; and Lower Parent interest and G&A expenses YTD 2019 YTD 2020 1. A non-GAAP
Slide 41: YTD Financial Results: US & Utilities SBU
YTD Financial Results: US & Utilities SBU $ in Millions l Lower Adjusted PTC1 Adjusted PTC1 driven primarily by: Lower regulated retail margin at DP&L implemented in Q4 2019; Lower demand at utilities due to the impact of COVID-19; and Capacity reduction due to retirements of units at Southlan
Slide 42: YTD Financial Results: South America SBU
YTD Financial Results: South America SBU $ in Millions l Higher Adjusted PTC1 driven Adjusted PTC1 primarily by higher contributions from AES Gener, including better operating performance at Guacolda and recovery of previously expensed payments from customers in Chile +$38 l Partially offset by: D
Slide 43: YTD Financial Results: MCAC SBU
YTD Financial Results: MCAC SBU $ in Millions l Higher Adjusted PTC1 Adjusted PTC1 driven primarily by improved availability and hydrology in Panama l Partially offset by outage- related insurance proceeds in the Dominican Republic in 2019 +$31 $144 $113 YTD 2019 YTD 2020 1. A non-GAAP financial mea
Slide 44: YTD Financial Results: Eurasia SBU
YTD Financial Results: Eurasia SBU $ in Millions l Lower Adjusted PTC1 Adjusted PTC1 driven primarily by the impact of sold businesses in the United Kingdom in 2019 l Partially offset by improved operational performance in Vietnam -$2 $95 $93 YTD 2019 YTD 2020 1. A non-GAAP financial measure. See “d
Slide 45: Q2 Adjusted PTC: Reconciliation to Public Financials of Listed Subsidiaries
Q2 Adjusted PTC1: Reconciliation to Public Financials of Listed Subsidiaries & Public Filers This table provides financial data of those operating subsidiaries of AES that are publicly listed or have publicly filed financial information on a stand-alone basis. The table provides a reconciliation of
Slide 46: Q2 2020 Modeling Disclosures
Q2 2020 Modeling Disclosures $ in Millions Interest Expense Interest Income Depreciation & Amortization Adjusted PTC 1 Consolidated Attributable Ownership- Consolidated Attributable Ownership- Consolidated Attributable Ownership- to NCI Adjusted to NCI Adjusted to NCI Adjusted US & Utilities $57 $93
Slide 47: Q2 2020 Modeling Disclosures
Q2 2020 Modeling Disclosures $ in Millions Cash & Cash Equivalents, Restricted Cash, Short-Term Investments, Total Debt Debt Service Reserves & Other Deposits Consolidated Attributable to NCI Ownership-Adjusted Consolidated Attributable to NCI Ownership-Adjusted US & Utilities $8,068 ($819) $7,249 $
Slide 48: Adjusted EPS Guidance and Longer-Term Growth Rate Target
Adjusted EPS1 Guidance and Longer-Term Growth Rate Target $ Per Share $1.36 $1.32-$1.42 $1.24 + Southland repowering 7%-9% + OPGC Average + Renewables backlog Annual + Cost savings Growth2 + Parent interest − DPL − Argentina − COVID-19 2018 Actual 2019 Actual 2020 Guidance 2022 Target 1. A non-GAAP
Slide 49: Parent Free Cash Flow Expectation and Longer-Term Growth Rate Target
Parent Free Cash Flow1 Expectation and Longer-Term Growth Rate Target $ in Millions $725-$775 $689 $726 7%-9% Average Annual Growth2 2018 Actual 2019 Actual 2020 Expectation 2022 Target 1. A non-GAAP financial measure. See “definitions”. The Company is not able to provide a corresponding GAAP equiva
Slide 50: 2020 Adjusted PTC Modeling Ranges
2020 Adjusted PTC Modeling Ranges $ in Millions 2020 Adjusted PTC Modeling SBU Drivers of Growth Versus 2019 Ranges as of 5/7/201 + Southland Repowering + Renewables US and Utilities $535-$580 − DPL − Lower demand − Argentina − Lower demand South America $455-$490 + Green Blend and Extend in Chile +
Slide 51: AES Modeling Disclosures
AES Modeling Disclosures $ in Millions 2020 Subsidiary Distributions (a) $1,075-$1,125 Cash Interest (b) ($175) Corporate Overhead ($90) Parent-Funded SBU Overhead ($80) Business Development/Taxes ($5) Cash for Development, General & Administrative and Tax (c) ($175) Parent Free Cash Flow1 (a – b –
Slide 52: Year-to-Go 2020 Guidance Estimated Sensitivities
Year-to-Go 2020 Guidance Estimated Sensitivities Interest Rates1 l 100 bps increase in interest rates over 2020 is forecasted to have a change in Adjusted EPS of approximately ($0.015) 10% appreciation of USD against following Year-to-Go 2020 currencies is forecasted to have the following Adjusted E
Slide 53: Foreign Exchange Risk Before Hedges
Foreign Exchange (FX) Risk Before Hedges Cents Per Share, Exposures Before Hedges Full Year 2022 Adjusted EPS1 FX Sensitivity2 1.0 (0.5) (0.5) (0.5) (1.0) Argentine Peso 3 Brazilian Real Chilean Peso Colombian Peso Euro l 2022 FX risk for 10% US Dollar appreciation against foreign currency, before i
Slide 54: Commodity Risk
Commodity Risk Cents Per Share Full Year 2022 Adjusted EPS1 Commodity Sensitivity2 0.5 (0.5) (0.5) Coal Gas Oil Power 1. A non-GAAP financial measure. See “definitions”. 2. Sensitivities assumes fuel moves 10% relative to commodities as of December 31, 2019. Adjusted EPS is negatively correlated to
Slide 55: PPAs Awarded or Signed in YTD 2020
PPAs Awarded or Signed in YTD 2020 AES Equity PPA Project Location Technology Gross MW Interest Expected COD1 Length (Years) Chile & Solar 190 AES Gener Colombia 67% 1H 2021-1H 2022 10-21 Wind 391 Solar 242 AES DE US-Various 100% 1H-2H 2021 20 Energy Storage 247 sPower – CPA US-CA Energy Storage 100
Slide 56: Reconciliation of Q2 Adjusted PTC and Adjusted EPS
Reconciliation of Q2 Adjusted PTC1 and Adjusted EPS1 Q2 2020 Q2 2019 Per Share Per Share Net of NCI2 (Diluted) Net of Net of NCI2 (Diluted) Net of $ in Millions, Except Per Share Amounts NCI2 NCI2 Income (Loss) from Continuing Operations, Net of Tax, Attributable to AES and ($86) ($0.13) $16 $0.02 D
Slide 57: Reconciliation of YTD Adjusted PTC and Adjusted EPS
Reconciliation of YTD Adjusted PTC1 and Adjusted EPS1 YTD 2020 YTD 2019 Per Share Per Share Net of NCI2 (Diluted) Net of Net of NCI2 (Diluted) Net of $ in Millions, Except Per Share Amounts NCI2 NCI2 Income (Loss) from Continuing Operations, Net of Tax, Attributable to AES and $58 $0.09 $170 $0.26 D
Slide 58: Reconciliation of FY Adjusted PTC and Adjusted EPS
Reconciliation of FY Adjusted PTC1 and Adjusted EPS1 FY 2019 FY 2018 Per Share Per Share Net of NCI2 (Diluted) Net of Net of NCI2 (Diluted) Net of $ in Millions, Except Per Share Amounts NCI2 NCI2 Income from Continuing Operations, Net of Tax, Attributable to AES and $302 $0.45 $985 $1.48 Diluted EP
Slide 59: Reconciliation of Parent Free Cash Flow
Reconciliation of Parent Free Cash Flow1 $ in Millions 2019 2018 Net Cash Provided by Operating Activities at the Parent Company2 $583 $409 Subsidiary Distributions to QHCs Excluded from Schedule 13 $183 $117 Subsidiary Distributions Classified in Investing Activities4 $60 $267 Parent-Funded SBU Ove
Slide 60: 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 61: 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 der