The Aes Corporation · NYSE:AES
The Aes — Q1 2020 Earnings Presentation
52 slides from The Aes's earnings presentation, May 7, 2020
Slide 1: First Quarter 2020 Financial Review
May 7, 2020 The AES Corporation First 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, predominantly long-term contracted business model l Strong liquidity, investment grade rated and manageable debt profile l Construction continuing on schedule without any supply chain disruption l Signed long-term PPAs for 685 MW of renewables l On track to achieve decarboniz
Slide 4: Core Themes for Today's Call
Core Themes for Today’s Call Resilience Sustainable Growth Leadership in Innovation 4 Contains Forward-Looking Statements
Slide 5: Resilience: Well-Positioned to Withstand Impacts of COVID-19 Pandemic
Resilience Well-Positioned to Withstand Impacts of COVID-19 Pandemic l Proactive steps taken in order to continue to deliver safe, reliable and affordable electricity to our customers l Top priority remains the safety and health of AES people l Operations are continuing normally 5 Contains Forward-L
Slide 6: Resilience of Business Model
Resilience of Business Model 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 Appendix for definition. 2. Short-term is defined as the percent of Adj
Slide 7: Sustainable Growth: 5.3 GW Backlog of Renewables
Sustainable Growth: 5.3 GW Backlog of Renewables Under Construction1 10% Hydro 11% Energy Storage 33% 43% Wind 67% 36% Solar Signed PPAs 1. As of March 31, 2020. 7 Contains Forward-Looking Statements
Slide 8: Sustainable Growth: Progress on Backlog
Sustainable Growth: Progress on Backlog l Construction of 531 MW Alto Maipo project in Chile is more than 88% complete, with Phase 1 ~93% complete l No significant COVID-19-related impacts at 1.3 GW of solar, wind and energy storage under construction Temporarily stopped work at two projects (6.5
Slide 9: Sustainable Growth: Innovation in Solar PV
Sustainable Growth: Innovation in Solar PV Andes Solar in Chile New Prefabricated Solar PV l Began commissioning world’s most l Beginning with 10 MW in Chile efficient solar project, Andes Solar l Reduces construction time by half 37% capacity factor Utilizing bifacial solar panels l Doubles ene
Slide 10: Sustainable Growth: Continued Rapid Growth in Energy Storage
Sustainable Growth: Continued Rapid Growth in Energy Storage AES Projects Fluence l In April, sPower signed a 15-year l Global market leader PPA for 100 MW of four-hour 1.3 GW under construction duration energy storage Total of 1,711 MW delivered or l Commissioning world’s first virtual awarded
Slide 11: Sustainable Growth: Transforming Business Mix
Sustainable Growth: Transforming Business Mix, While Delivering a Double-Digit Total Return1 Reducing Generation (MWh) from Coal to Below 30% by Year-End 2020 and to Less Than 10% by 20302 <30% <10% Year-End 2020 Year-End 2030 1. 7% to 9% average annual growth in Adjusted EPS through 2022, plus ~3%
Slide 12: Leadership in Innovation: Uplight 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 Over $130 million in sales in 2019 Expect growth of 30% in 2020 12 Contains Forward-Look
Slide 13: Q1 2020 Financial Review
Q1 2020 Financial Review l Q1 2020 results l Credit profile l Parent capital allocation plans l 2020 guidance and expectations through 2022 13 Contains Forward-Looking Statements
Slide 14: Q1 2020 Adjusted EPS Increased $0.01
Q1 2020 Adjusted EPS1 Increased $0.01 $0.04 $0.29 $0.28 ($0.01) ($0.02) l 2019: 32% − IPL l 2020: 23% − DPL + Panama Q1 2019 SBUs/Corp Tax Sales/Shutdowns Q1 2020 1. A non-GAAP financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 14 Contains Forward-Looking
Slide 15: Q1 Financial Results
Q1 Financial Results $ in Millions l Lower Adjusted PTC1 Adjusted PTC1 driven primarily by the US & Utilities SBU: Reversion to prior rates at -$22 DPL in Ohio; and Mild weather at regulated utilities l Partially offset by increased $272 $250 availability and improved hydrology in Panama in the
Slide 16: Q1 Financial Results: US & Utilities SBU
Q1 Financial Results: US & Utilities SBU $ in Millions l Lower Adjusted PTC1 Adjusted PTC1 driven primarily by: Reversion to prior rates at DPL in Ohio; Mild weather at regulated utilities; and Decrease in Asset Retirement Obligations at -$51 DPL in 2019 $122 $71 Q1 2019 Q1 2020 1. A non-GAAP
Slide 17: Q1 Financial Results: South America SBU
Q1 Financial Results: South America SBU $ in Millions l Higher Adjusted PTC1 Adjusted PTC1 driven primarily by lower interest expense and realized foreign currency gains in Chile l Partially offset by a planned major outage at hydro plant +$4 in Colombia $115 $119 Q1 2019 Q1 2020 1. A non-GAAP finan
Slide 18: Q1 Financial Results: MCAC SBU
Q1 Financial Results: MCAC SBU $ in Millions l Higher Adjusted PTC1 Adjusted PTC1 driven primarily by improved availability and hydrology in Panama +$28 $78 $50 Q1 2019 Q1 2020 1. A non-GAAP financial measure. See Appendix for definition. 18 Contains Forward-Looking Statements
Slide 19: Q1 Financial Results: Eurasia SBU
Q1 Financial Results: Eurasia SBU $ in Millions l Lower Adjusted PTC1 Adjusted PTC1 driven primarily by sold businesses in the United Kingdom -$12 $56 $44 Q1 2019 Q1 2020 1. A non-GAAP financial measure. See Appendix for definition. 19 Contains Forward-Looking Statements
Slide 20: Update on DP&L in Ohio
Update on DP&L in Ohio l DP&L filed for Significantly Excessive Earnings Test (SEET) and More Favorable in the Aggregate (MFA) test in April 2020 Comment period set for July 2020 Potential hearing set for October 2020 (if needed) Final ruling expected by early 2021 l Planning to invest $300 mi
Slide 21: Expect to Further Strengthen Investment Grade Metrics by Year-End 2020
Expect to Further Strengthen Investment Grade Metrics by Year-End 2020 $ in Millions Since 2011, Parent Debt Reduced by Nearly Half $6,515 $3,4182 Parent Debt as of Parent Debt as of December 31, 2011 December 31, 2019 Parent 6.4x 3.7x Leverage1 FFO/Parent 9.4% 21.2% Debt Already Achieved Investment
Slide 22: $3.3 Billion in Liquidity
$3.3 Billion in Liquidity $ in Millions $3,342 $2,815 $804 $623 $2,538 $2,192 $527 $181 $346 Corp SBUs Total Cash Balance1 Committed Credit Lines Note: As of March 31, 2020. 1. Includes cash and cash equivalents, restricted cash, short-term investments and debt service reserves and other deposits. 2
Slide 23: Receivables Remain Stable
Receivables Remain Stable Balance Receivables Days Sales Outstanding ($ in Millions) (# of Days) $1,748 $1,663 $1,624 48.8 49.3 49.9 Q1 2019 Q4 2019 Q1 2020 Q1 2019 Q4 2019 Q1 2020 Receivables and Days Sales Outstanding in Line with 45-60 Day Standard Allowed Grace Period 23 Contains Forward-Looking
Slide 24: Already Refinanced 60% of 2020 Non-Recourse Debt Maturities
Already Refinanced 60% of 2020 Non-Recourse Debt Maturities $ in Millions Limited Refinancing Needs in 2020 $801 $101 $90 $331 $470 $140 $470 IPALCO Completed1 DP&L to be IPL to be AES Tietê to be Total Refinanced in Q3 Refinanced in Q4 Refinanced in Q4 Note: Based on non-recourse debt outstanding a
Slide 25: 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 Allocated3 $725- $1,348- Shareholder $0- $775 $1,398 Dividend $0- $180 $452 $381 $60 $550 $565 $13 Beginning Asset Sales1 Return of Parent
Slide 26: 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 Sales1 Return of Capital Parent FCF 2 Total Cash 1. Includes: ~$85 million pending sale of businesses in Jordan and proceeds from planned asset sales. Prior target was $2 billion fr
Slide 27: 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 28: COVID-19 Impact on 2020 Guidance
COVID-19 Impact on 2020 Guidance $0.07 Impact on l Volumetric risk: primarily at US 2020 Adjusted EPS1 regulated utilities, where C&I demand declined by mid-teens, partially offset by an increase in residential demand of 6%; internationally, demand has declined ($0.03) by 5% to 15%, but exposure is
Slide 29: Guidance & Expectations
Guidance & Expectations Reducing 2020 Adjusted EPS1 Guidance by 5%; Reaffirming 2020 Parent Free Cash Flow1 Expectation and Average Annual Growth Target Prior Revised 2020 Adjusted EPS1 Guidance $1.40-$1.48 $1.32-$1.42 2020 Parent Free Cash Flow1 $725-$775 million No change Expectation Adjusted EPS1
Slide 30: Key Takeaways
Key Takeaways l Remain on track to achieve strategic goals of: Greening our portfolio Leading in new technologies Attaining a second investment grade rating l COVID-19 expected to have a 5% negative impact on 2020 Adjusted EPS1 l Reaffirming 2020 Parent Free Cash Flow1, longer-term average ann
Slide 31: Appendix
Appendix l Parent Only Cash Flow & Liquidity Slides 32-35 l Q1 Adjusted EPS1 Roll-Up Slide 36 l Listed Subs & Public Filers Slide 37 l SBU Modeling Disclosures Slides 38-39 l 2020 Guidance & Expectations Through 2022 Slides 40-41 l 2020 Adjusted PTC1 Modeling Ranges Slide 42 l AES Modeling Disclosur
Slide 32: Parent Sources and Uses of Liquidity
Parent Sources and Uses of Liquidity Q1 $ in Millions 2020 2019 Sources Total Subsidiary Distributions1 $189 $200 Proceeds from Asset Sales, Net - - Financing Proceeds, Net - - Increased/(Decreased) Credit Facility Commitments - - Issuance of Common Stock, Net - $5 Total Returns of Capital Distribut
Slide 33: Q1 2020 Subsidiary Distributions
Q1 2020 Subsidiary Distributions1 $ in Millions Subsidiary Distributions1 by SBU Q1 2020 US & Utilities $131 South America $2 MCAC $14 Eurasia $32 Corporate & Other2 $10 Total $189 Top Ten Subsidiary Distributions1 by Business Q1 2020 Business Amount Business Amount US Holdco (US & Utilities) $98 sP
Slide 34: Subsidiary Distributions from Utilities & Contracted Generation and Investment Grade Countries
Subsidiary Distributions from Utilities & Contracted Generation and Investment Grade Countries % of Subsidiary Distributions from % of Subsidiary Distributions from Utilities & Contracted Generation Investment Grade Countries 75% 83% 80% 80% 86% 74% 72% 73% 65% 59% 2015 2016 2017 2018 2019 2015 2016
Slide 35: Reconciliation of Subsidiary Distributions and Parent Liquidity
Reconciliation of Subsidiary Distributions1 and Parent Liquidity1 $ in Millions Quarter Ended March 31, December 31, September 30, June 30, 2020 2019 2019 2019 Total Subsidiary Distributions1 to Parent & QHCs2 $189 $396 $326 $269 Total Return of Capital Distributions to Parent & QHCs2 - $19 $198 - T
Slide 36: Q1 Adjusted EPS Roll-Up
Q1 Adjusted EPS1 Roll-Up $ in Millions, Except Per Share Amounts Q1 2020 Q1 2019 Variance Adjusted PTC1 US & Utilities $71 $122 ($51) South America $119 $115 $4 MCAC $78 $50 $28 Eurasia $44 $56 ($12) Total SBUs $312 $343 ($31) Corp/Other ($62) ($71) $9 Total AES Adjusted PTC1,2 $250 $272 ($22) Adjus
Slide 37: Q1 Adjusted PTC: Reconciliation to Public Financials of Listed Subsidiaries
Q1 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 38: Q1 2020 Modeling Disclosures
Q1 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 $71 $83
Slide 39: Q1 2020 Modeling Disclosures
Q1 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 $7,596 ($809) $6,787 $
Slide 40: Adjusted EPS Guidance and Longer-Term Growth Rate Target
Adjusted EPS1 Guidance and Longer-Term Growth Rate Target $ Per Share $1.40-$1.48 $1.32-$1.42 $1.36 $1.24 + Southland repowering + OPGC + Renewables 7%-9% backlog Average + Cost savings Annual + Parent interest Growth2 − DPL − Argentina − Tax rate − COVID-19 2018 Actual 2019 Actual Prior 2020 Revise
Slide 41: 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 42: 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 43: 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 44: 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 ($0.020) 10% appreciation of USD against following Year-to-Go 2020 currencies is forecasted to have the following Adjusted E
Slide 45: Foreign Exchange (FX) 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) (0.5) (1.0) Argentine Peso 3 Brazilian Real Chilean Peso Colombian Peso Euro Indian Rupee l 2022 FX risk for 10% US Dollar appreciation against foreign
Slide 46: 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 47: PPAs Signed in YTD 2020
PPAs Signed in YTD 2020 AES Equity PPA Project Location Technology Gross MW Interest Expected COD1 Length (Years) Solar 131 AES Gener Chile 67% 1H 2021-1H 2022 10-21 Wind 391 Solar 7 AES DE US-Various 100% 1H-2H 2021 20 Energy Storage 1 sPower – CPA US-CA Energy Storage 100 50% 2H 2021 15 Penonomé I
Slide 48: Reconciliation of Q1 Adjusted PTC and Adjusted EPS
Reconciliation of Q1 Adjusted PTC1 and Adjusted EPS1 Q1 2020 Q1 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 from Continuing Operations, Net of Tax, Attributable to AES and $144 $0.22 $154 $0.23 Diluted EP
Slide 49: 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 50: 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 51: 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 52: 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