AES Reports 22% Increase in Adjusted Earnings Per Share to $1.24 for Full Year 2012; Announces 2013

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AES Reports 22% Increase in Adjusted Earnings Per Share to $1.24 for Full Year 2012; Announces 2013 Adjusted Earnings Per Share Guidance of $1.24 to $1.32

Announces Increased Share Buyback Authorization by $300 Million

2012 Highlights

  • Achieved 2012 Adjusted EPS and Proportional Free Cash Flow guidance
  • Invested $531 million in repayment of recourse debt and $301 million in share repurchases
  • Reduced general and administrative expenses by $90 million and exceeded cost savings target by 38%
  • Closed eight asset sales with approximately $650 million of proceeds
  • Completed construction of 447 MW of installed capacity

ARLINGTON, Va.--(BUSINESS WIRE)-- The AES Corporation (NYS: AES) today reported Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) of $1.24 for full year 2012. The contributions from new businesses, which collectively represent more than 1,900 MW of capacity additions, and improved performance at generation plants in the U.S. and Asia drove strong operating performance for the year. Reductions of general and administrative expenses also contributed to earnings growth. These positive drivers were partially offset by higher taxes and declines in Chile, due to lower spot margins and second quarter plant outages, and Brazil, as a result of the tariff reset at Eletropaulo. The Company also reported Diluted Earnings Per Share from Continuing Operations of ($1.21), which declined principally due to a goodwill impairment expense of $1,817 million, or $2.41 per share, at DPL in the third quarter of 2012.

"In the fourth quarter of 2011, we undertook a new strategy to drive operating performance and profitability, improve cash flow and returns on our investments, and streamline our portfolio. Since then, we have reduced general and administrative costs by $90 million, invested more than $1.1 billion in our balance sheet, and closed asset sales representing nearly $1 billion of equity proceeds to AES. As a result of all of these initiatives, we have delivered on our financial commitments," said Andrés Gluski, AES President and Chief Executive Officer. "We remain strongly dedicated to continuing to implement our strategy to meet our commitments to shareholders."

"We continue to expect 4% to 6% average annual EPS capital growth, which combined with our current dividend yield, is in line with our 6% to 8% three-year total return expectations through 2015," said Tom O'Flynn, AES Executive Vice President and Chief Financial Officer. "We are committed to maximizing our total return through strong operations, effective capital management and deployment of discretionary cash into debt reduction, share repurchases and attractive growth investments."

  

Table 1: Key Financial Results

  Full Year Fourth Quarter
  2012 2011 2012 2011
Adjusted EPS1 $1.24   $1.02  $0.32  $0.23 
Diluted EPS from Continuing Operations $(1.21)  $0.63  $0.31  $0.18 
Proportional Free Cash Flow1 $1,242 M $932M $293M $168M
Consolidated Net Cash Provided by Operating Activities $2,901 M $2,884M $772M $571M

1 A non-GAAP financial measure. See "Non-GAAP Financial Measures" for definitions and reconciliations to the most comparable GAAP financial measures.

Full year 2012 Adjusted EPS of $1.24 was in the Company's guidance range of $1.22 to $1.30. This performance was driven by the contributions of new businesses, lower general and administrative expenses and a lower share count, partially offset by higher taxes and lower spot margins and second quarter outages in Chile and the Eletropaulo tariff reset in Brazil. Full year 2012 Diluted Earnings Per Share from Continuing Operations decreased $1.84, principally due to the DPL goodwill impairment expense of $2.41 per share.

Proportional Free Cash Flow of $1,242 million was in the Company's guidance range of $1,050 to $1,250 million. This performance was driven by the first full year of operations at DPL, improved operating performance and lower capital expenditures at IPL in the U.S., and increased operating cash flow at Masinloc in Asia.

Consolidated Net Cash Provided by Operating Activities increased $17 million, or 1%, as increases from new businesses and improved operations were offset by the negative impact of the tariff reset, higher fixed costs and higher working capital requirements at Eletropaulo in Brazil.

Additional Highlights

  • In 2012, the Company invested $832 million in debt repayment and share repurchases; cumulatively since September 2011, the company has invested $1.1 billion in its balance sheet:
    • More than $700 million of recourse and non-recourse debt prepayment
    • $390 million invested in 34 million shares at an average price of $11.55
  • In 2012, the Company closed eight asset sales, representing approximately $650 million in equity proceeds to AES; cumulatively, since September 2011, the Company closed twelve asset sales with nearly $1 billion in equity proceeds to AES
  • The Company reduced general and administrative expenses by $90 million in 2012, exceeding its $65 million cost savings target by 38%; on track to achieve $145 million in savings by 2014
  • Completed construction of 447 MW of installed capacity during 2012, including the 326 MW gas-fired Trinidad Unit 2 and 121 MW of wind and hydroelectric projects
  • On schedule to complete an additional 2,181 MW of capacity under construction expected to come on-line through 2015
  • The Company's Board of Directors recently increased the share buyback authorization by $300 million, all of which is currently available

2013 Guidance

The Company issued 2013 guidance of Adjusted EPS of $1.24 to $1.32, which is based on foreign exchange and commodity price forward curves as of December 31, 2012. The Company's guidance includes all announced asset sales, as well as some modest dilution from potential future asset sale transactions.

Proportional Free Cash Flow is expected to be $750 to $1,050 million, reflecting a decline due to increased environmental capital expenditures at AES Gener and IPL, which will help drive future earnings growth, and lower operating performance at DPL, primarily driven by lower PJM capacity prices and an expected transition to the market. Consolidated Net Cash Provided by Operating Activities is also expected to decline, due to higher working capital requirements in Brazil.

 

Table 2: 2013 Guidance and Reconciliation

  

Full Year 2013
Guidance

Adjusted EPS1 $1.24-1.32 
Proportional Free Cash Flow1 (a) $750-1,050M
Reconciling Factor2 (b) $1,750-2,050M
Cash Flow from Operating Activities (a + b) $2,500-3,100M

1 A non-GAAP financial measure. See "Non-GAAP Financial Measures" for definitions and reconciliations to the most comparable GAAP financial measures.

2 Primarily includes minority interest, maintenance capex and environmental capex. See Appendix for details of the reconciliation.

2012 Operating Drivers

In 2012, the Company implemented a reorganization into six market-oriented Strategic Business Units ("SBUs"): US (United States), Andes (Chile, Colombia, and Argentina), Brazil, MCAC (Mexico, Central America and the Caribbean), EMEA (Europe, Middle East and Africa), and Asia.

Adjusted Pre-Tax Contribution (Adjusted PTC, a non-GAAP financial measure), is defined by the Company as pre-tax income from continuing operations attributable to AES excluding unrealized gains or losses related to derivative transactions, unrealized foreign currency gains or losses, significant gains or losses due to dispositions and acquisitions of business interests, significant losses due to impairments and costs due to the early retirement of debt. Adjusted PTC also includes net equity in earnings of affiliates on an after-tax basis. The Company has concluded that Adjusted PTC best reflects the underlying business performance of the Company and is the most relevant measure considered in the Company's internal evaluation of the financial performance of its segments.

  

Table 3: Adjusted PTC1by SBU

  Full Year 2012 Full Year 2011
US $410M $181M
Andes $369M $508M
Brazil $321M $415M
MCAC $388M $306M
EMEA $422M $290M
Asia $201M $99M
Total SBUs $2,111M $1,799M
Corp/Other $(734)M $(721)M
Total AES Adjusted PTC1,2 $1,377M $1,078M
Adjusted Effective Tax Rate  32%   26% 
Share Count  760   783 
Adjusted EPS1 $1.24  $1.02 

1 A non-GAAP financial measure. See "Non-GAAP Financial Measures" for definitions and reconciliations to the most comparable GAAP financial measures.

2 Includes $34 million and ($2) million of after-tax net equity in earnings of affiliates in 2012 and 2011, respectively.

Full year 2012 Adjusted PTC increased $299 million. Key operating drivers of Adjusted PTC for each SBU in 2012 included:

  • US - An increase of $229 million, driven by the first full year of contributions from DPL, improved performance at Hawaii and Southland, due to the temporary restart of Huntington Beach Units 3 and 4.
  • Andes - A decrease of $139 million due to lower spot margins and second quarter outages in Chile, as well as higher maintenance costs in Argentina.
  • Brazil - A decrease of $94 million, primarily due to the impact of the tariff reset at Eletropaulo and the depreciation of the Real.
  • MCAC - An increase of $82 million driven by the first full year of operations of Changuinola in Panama.
  • EMEA - An increase of $132 million primarily due to the first full year of contributions of Maritza in Bulgaria, as well as a non-recurring arbitration settlement at Cartagena in Spain.
  • Asia - An increase of $102 million driven by higher market demand at Masinloc in the Philippines.

Non-GAAP Financial Measures

See Non-GAAP Financial Measures for definitions of Adjusted Earnings Per Share, Adjusted Pre-Tax Contribution, Proportional Cash Flow From Operating Activities, Proportional Free Cash Flow, as well as reconciliations to the most comparable GAAP financial measure.

In providing its full year 2013 Adjusted EPS guidance, the Company notes that there could be differences between expected reported earnings and estimated operating earnings for matters such as, but not limited to: (a) unrealized gains or losses related to derivative transactions; (b) unrealized foreign currency gains or losses; (c) gains or losses due to dispositions and acquisitions of business interests; (d) losses due to impairments, estimated to be approximately $20 million in 2013 related to the sale of the Ukraine utilities; and (e) costs due to the early retirement of debt. At this time, management is not able to estimate the aggregate impact, if any, of these items on reported earnings. Accordingly, the Company is not able to provide a corresponding GAAP equivalent for its Adjusted EPS guidance.

Attachments

Consolidated Statements of Operations, Consolidated Balance Sheets, Segment Information, Consolidated Statements of Cash Flows, Non-GAAP Financial Measures, Parent Financial Information and 2012 and 2013 Financial Guidance Elements.

Conference Call Information

AES will host a conference call on Wednesday, February 27, 2013 at 10:00 a.m. Eastern Standard Time (EST). Interested parties may listen to the teleconference by dialing 1-800-857-6557 at least ten minutes before the start of the call. International callers should dial +1-415-228-4653. The participant passcode for this call is 22713. Internet access to the presentation materials will be available on the AES website at www.aes.com by selecting "Investors" and then "Quarterly Financial Results."

A telephonic replay of the call will be available from approximately 12:00 p.m. EST on Wednesday, February 27, 2013 through Wednesday, March 20, 2013. Callers in the U.S. please dial 1-800-839-7074. International callers should dial +1-203-369-3359. The system will ask for a passcode; please enter 22713. A webcast replay, as well as a replay in downloadable MP3 format, will be accessible at www.aes.com beginning shortly after the completion of the call.

About AES

The AES Corporation (NYS: AES) is a Fortune 200 global power company. We provide affordable, sustainable energy to 25 countries through our diverse portfolio of distribution businesses as well as thermal and renewable generation facilities. Our workforce of 25,000 people is committed to operational excellence and meeting the world's changing power needs. Our 2012 revenues were $18 billion and we own and manage $42 billion in total assets. 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 (the "SEC"), including, but not limited to, the risks discussed under Item 1A "Risk Factors" and Item 7: Management's Discussion & Analysis in AES' 2012 Annual Report on Form 10-K and in subsequent reports filed with the SEC. 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.

Any Stockholder who desires a copy of the Company's 2012 Annual Report on Form 10-K dated on or about February 26, 2013 with the SEC may obtain a copy (excluding Exhibits) without charge by addressing a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203. Exhibits also may be requested, but a charge equal to the reproduction cost thereof will be made. A copy of the Form 10-K may be obtained by visiting the Company's website at www.aes.com.

 
THE AES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2012, 2011, AND 2010
   
201220112010
(in millions, except per share amounts)
Revenue:
Regulated$9,925$9,504$8,910
Non-Regulated 8,216  7,419  6,533 
Total revenue 18,141  16,923  15,443 
Cost of Sales:
Regulated(8,433)(7,134)(6,497)
Non-Regulated (5,994) (5,726) (5,126)
Total cost of sales (14,427) (12,860) (11,623)
Gross margin 3,714  4,063  3,820 
General and administrative expenses(301)(391)(391)
Interest expense(1,572)(1,553)(1,449)
Interest income349399407
Other expense(93)(153)(232)
Other income105149100
Gain on sale of investments2198-
Goodwill impairment(1,817)(17)(21)
Asset impairment expense(73)(173)(304)
Foreign currency transaction losses(167)(39)(33)
Other non-operating expense (50) (82) (7)
INCOME FROM CONTINUING OPERATIONS BEFORE
TAXES AND EQUITY IN EARNINGS OF AFFILIATES3142,2111,890
Income tax expense(708)(634)(593)
Net equity in earnings (losses) of affiliates 34  (2) 184 
INCOME (LOSS) FROM CONTINUING OPERATIONS(360)1,5751,481
Loss from operations of discontinued businesses, net of income tax
expense (benefit) of $3, $(26) and $(284), respectively(13)(131)(486)
Net gain from disposal and impairments of discontinued businesses, net of income
tax expense of $68, $300 and $132, respectively 16  86  64 
NET INCOME (LOSS)(357)1,5301,059
Noncontrolling interests:
Less: Income from continuing operations attributable to noncontrolling interests(555)(1,083)(985)
Less: Income from discontinued operations attributable to noncontrolling interests -  (389) (65)
Total net income attributable to noncontrolling interests (555) (1,472) (1,050)
NET INCOME (LOSS) ATTRIBUTABLE TO THE AES CORPORATION$(912)$58 $9 
AMOUNTS ATTRIBUTABLE TO THE AES CORPORATION
COMMON STOCKHOLDERS:
Income (loss) from continuing operations, net of tax$(915)$492$496
Income (loss) from discontinued operations, net of tax 3  (434) (487)
Net income (loss)$(912)$58 $9 
BASIC EARNINGS PER SHARE:
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