AES Corp.: Q1 results
ARLINGTON, Virginia - The AES Corporation (AES) reported Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) of $0.25 for first quarter 2015, an increase of $0.01 from first quarter 2014, as the Company benefited from improved operating performance and from its capital allocations, which resulted in a 13% reduction in Parent debt and a 3% lower share count. These positive drivers were largely offset by the impact of a stronger US Dollar and a slightly higher adjusted effective tax rate of 33% in 2015, versus 30% in 2014.
First quarter 2015 Diluted Earnings Per Share from Continuing Operations was $0.20, an increase of $0.27 from first quarter 2014, primarily driven by losses of $0.30 from impairments and early debt retirement recorded in the first quarter of 2014, compared to $0.04 recorded in the first quarter of 2015.
First quarter 2015 Proportional Free Cash Flow (a non-GAAP financial measure) was $265 million, an increase of $136 million from first quarter 2014, primarily driven by working capital improvements at the Company's United States and Brazilian utilities and higher collections at Maritza in Bulgaria.
"We made significant progress on our priorities for 2015 in the first quarter. Most notably, we commissioned the 1,240 MW Mong Duong 2 plant in Vietnam six months early. We also achieved substantial milestones towards resolving outstanding receivables in Bulgaria and re-securing coal allocations for our OPGC 2 project under construction in India," said Andrés Gluski, AES President and Chief Executive Officer. "Our $9 billion construction program remains on track and will be the largest contributor of our 10% to 15% average annual cash flow growth through 2018. We will continue to use our growing cash flow to maximize total shareholder returns through dividend growth, share buybacks, debt reduction and investment in profitable expansion opportunities in our existing markets."
"We are pleased with our business and financial performance this quarter and we are reaffirming our guidance ranges for cash flow and Adjusted EPS, despite a slightly more negative impact than we previously expected from hydrology in Brazil and foreign currency and commodity forward curves," said Tom O'Flynn, AES Executive Vice President and Chief Financial Officer. "With our recent Parent debt prepayment and refinancing, we have reduced total maturities between 2015 and 2018 from $840 million to $181 million."
Discussion of Operating Drivers of Adjusted Pre-Tax Contribution (Adjusted PTC, a non-GAAP financial measure) and Adjusted EPS
The Company manages its portfolio in six market-oriented Strategic Business Units (SBUs): US (United States), Andes (Chile, Colombia and Argentina), Brazil, MCAC (Mexico, Central America and Caribbean), Europe, and Asia.
For the three months ended March 31, 2015, Adjusted EPS increased $0.01, as improved operating performance contributed $0.01 and the Company's capital allocation decisions contributed $0.03. These positive drivers were largely offset by the $0.02 impact of a stronger US Dollar and a $0.01 impact from a slightly higher adjusted effective tax rate. First quarter 2015 Adjusted PTC increased $9 million to $252 million. Key operating drivers of Adjusted PTC included:
US: An increase of $31 million, primarily driven by better availability at DPL as a result of temporary forced outages and a lack of available gas at a couple of its generation plants in 2014 that did not recur.
Andes: An increase of $38 million, due to better availability at the Company's coal generation plants in Chile.
Brazil: A decrease of $48 million. In addition to the devaluation of the Brazilian Real, the Company's generation business, Tiete, purchased energy on the spot market to fulfill its contract. Additionally, Sul, one of the Company's utilities, decreased due to lower sales and higher fixed costs.
MCAC: A decrease of $15 million, primarily driven by lower margins in the Dominican Republic, partially offset by improved hydrology in Panama.
Europe: A decrease of $30 million, driven by lower contributions due to the sales of Ebute in Nigeria and the Company's wind businesses in the United Kingdom, as well as unfavorable foreign currency exchange rates.
Asia: An increase of $4 million. In 2014, the Philippines market operator retroactively adjusted spot prices for November and December 2013, resulting in an unfavorable impact of $14 million at Masinloc in the first quarter of 2014. This was partially offset by lower contributions from Masinloc, as a result of the sale of 41% of the business during the third quarter of 2014.
Corp/Other: An improvement of $29 million, driven by lower interest expense on Parent debt and lower losses from the Company's solar joint venture. The Company has sold the majority of its interest in the solar joint venture.
First quarter 2015 Proportional Free Cash Flow increased $136 million, as described above. Key drivers of this improvement included:
US: An increase of $74 million, primarily driven by recovery of working capital of $32 million at the Company’s utilities, as well as higher operating performance.
Andes: A decrease of $6 million, primarily driven by timing of collections and higher maintenance capital expenditures, offset by better margins due to improved plant availability in Chile.
Brazil: An increase of $15 million, primarily driven by improved working capital of $20 million.
MCAC: An increase of $55 million, primarily driven by improved working capital.
Europe: An increase of $21 million, primarily driven by higher collections of $38 million at Maritza in Bulgaria, partially offset by lower operating performance.
Asia: A decrease of $37 million, primarily related to lower contributions from Masinloc in the Philippines, as a result of the sale mentioned above, as well as the contractual time lag between billing and collections.
Corp/Other: An increase of $14 million, primarily driven by lower general and administrative expenses.
First quarter 2015 Consolidated Net Cash Provided by Operating Activities increased $216 million to $437 million, primarily driven by working capital improvements at the Company's United States, Brazil and Europe SBUs.
The Company's 2015 guidance reflects currency and commodity forward curves as of March 31, 2015.
The Company is reaffirming its Proportional Free Cash Flow guidance range of $1,000-$1,350 million.
The Company is reaffirming its Consolidated Net Cash Provided by Operative Activities guidance range of $1,900-$2,700 million.
The Company is reaffirming its Adjusted EPS guidance range of $1.25-$1.35.
The Company's guidance was previously based on currency and commodity forward curves as of December 31, 2014. The impact on Adjusted EPS from updating the forward curves for as of March 31, 2015 is $0.05 per share; however, the Company continued to engage in proactive hedging, bringing this impact down to $0.02 per share.
The Company's guidance reflects its updated expectations for the impact from poor hydrology in Brazil. Although reservoir levels are in line with the Company's previous expectations, the Company now expects the Brazilian regulator to dispatch less hydro capacity in order preserve reservoir levels, causing Tiete to purchase more energy in the spot market to cover its contracted position. As a result, the Company is incorporating an additional $0.02-$0.03 per share impact, bringing the total impact for 2015 to $0.07-$0.08. In 2014, the impact from hydrology in Brazil was $0.07 per share.
The Company's guidance also reflects a $0.01 per share benefit from the early completion of the 1,240 MW Mong Duong 2 power plant in Vietnam.
Year-to-Date 2015 Highlights
The Company has brought on-line 1,312 MW of new projects.
In April, the Company achieved commercial operations of its 1,240 MW coal-fired Mong Duong 2 power plant in Vietnam six months early. Mong Duong 2 has a 25-year Power Purchase Agreement (PPA) with a state-owned utility.
In March, the Company inaugurated the 72 MW fuel oil-fired Estrella del Mar I power barge in Panama. The project has a 5-year PPA with a state-owned generation company.
The Company currently has 5,819 MW under construction and on track to come on-line through 2018.
Late last year, the Supreme Court of India overturned coal allocations for 214 projects, including the Company's OPGC 2 project under construction. In the first quarter of 2015, OPGC 2, through a joint venture between OPGC and the Government of Odisha, re-secured the rights to the coal blocks for the project.
In April, as previously disclosed, the Company's Maritza plant in Bulgaria signed a Heads of Terms Agreement with its offtaker, NEK, in which Maritza agreed to reduce the capacity payment under the long-term PPA, in exchange for NEK's payment of outstanding receivables. A binding agreement is expected to be signed by the third quarter of 2015.
The Company announced or closed $563 million in equity proceeds from asset sales or investments by strategic partners.
In 2014, the Company announced an agreement with La Caisse de depot et placement du Quebec (CDPQ), in which CDPQ would invest $595 million for direct and indirect interests in IPALCO, the Parent Company of Indianapolis Power & Light Company. Year-to-date, AES has received $461 million from CDPQ and expects to receive the remaining $134 million in 2015-2016.
In April, the Company agreed to sell its 101 MW Armenia Mountain wind project located in Pennsylvania for $75 million.
In March, the Company agreed to sell 40% of its interest in the 247 MW IPP4 heavy fuel oil-fired power plant in Jordan for $30 million.
The Company prepaid $315 million of near-term Parent debt maturities. The Company also took advantage of low interest rates and extended its Parent debt maturity profile by refinancing a significant portion of its Parent debt with a $575 million bond issuance due in 2025.
The Company has repurchased 3.4 million shares for $42 million.
Since its fourth quarter 2014 earnings call in February 2015, the Company has repurchased 1.5 million shares for $19 million.
The Company currently has $381 million of share repurchase authorization outstanding.
Since September 2011, the Company has repurchased 84.4 million shares, or 11% of its shares outstanding, for $1,061 million.
The AES Corporation (AES) is a Fortune 200 global power company. We provide affordable, sustainable energy to 18 countries through our diverse portfolio of distribution businesses as well as thermal and renewable generation facilities. Our workforce of 18,500 people is committed to operational excellence and meeting the world’s changing power needs. Our 2014 revenues were $17 billion and we own and manage $39 billion in total assets. To learn more, please visit www.aes.com