(AES, 7.May.2020) — The AES Corporation reported financial results for the quarter ended 31 March 2020.
— Completed construction of 1.4 GW of new projects, including the 1.3 GW Southland Repowering project in Southern California
— Signed 685 MW of new renewables under long-term PPAs, bringing backlog to 5.3 GW
— Fluence maintained global leadership in the energy storage market with 32 MW of projects awarded, bringing total backlog to 1.3 GW
Q1 2020 Financial Highlights
— Diluted EPS of $0.22, compared to $0.23 in Q1 2019
— Adjusted EPS1 of $0.29, compared to $0.28 in Q1 2019
Financial Position and Outlook
— Maintained strong liquidity of $3.3 billion
— Expects to comfortably exceed targeted investment grade ratio of Parent Free Cash Flow to Recourse Debt at year-end 2020
— Reducing mid-point of 2020 Adjusted EPS1 guidance by 5%, or $0.07 per share, and reaffirming 2020 Parent Free Cash Flow1 expectation of $725 to $775 million
— Also reaffirming 7% to 9% average annual growth target for Adjusted EPS and Parent Free Cash Flow through 20221, off a base of 2018 actuals
— Remain committed to growing dividend by 4% to 6% annually, subject to Board approval
“I am very proud of the work we are doing around the world to keep our people, customers and communities safe, while continuing to provide reliable and affordable energy solutions,” said Andrés Gluski, AES President and Chief Executive Officer. “Although COVID-19 will have a modest near-term impact on our 2020 earnings, we are in the strongest financial position in our company’s history. Therefore, we are reaffirming our 7% to 9% average annual growth target for Adjusted EPS and Parent Free Cash Flow through 2022. Year-to-date we achieved critical milestones on our backlog, including completing 1.4 GW of new projects and signing long-term contracts for 685 MW of renewable generation.”
“As a result of the proactive actions we have taken to strengthen our balance sheet and improve our debt maturity profile, we are well-positioned for today’s unforeseen crisis. In fact, we have $3.3 billion in available liquidity and no significant near-term debt maturities,” said Gustavo Pimenta, AES Executive Vice President and Chief Financial Officer. “The fundamentals of our business remain unchanged and we are on track to deliver strong and growing free cash flow, which will allow us to comfortably exceed the targeted investment grade ratio of Parent Free Cash Flow to Recourse debt this year.”
Key Q1 2020 Financial Results
First quarter 2020 Diluted Earnings Per Share from Continuing Operations (Diluted EPS) was $0.22, a decrease of $0.01 compared to first quarter 2019, primarily reflecting the reversion to prior rates at DPL in Ohio and mild weather at regulated utilities in the US & Utilities Strategic Business Unit (SBU), as well as current year impairments. These impacts were partially offset by higher contributions from the Mexico, Central American and Caribbean (MCAC) SBU, largely due to increased availability and improved hydrology in Panama, as well as unrealized derivatives gains and a lower tax rate.
First quarter 2020 Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) was $0.29, an increase of $0.01 compared to first quarter 2019, primarily reflecting higher contributions from the MCAC SBU, largely due to increased availability and improved hydrology in Panama, as well as a lower tax rate. These contributions were partially offset by the reversion to prior rates at DPL in Ohio and mild weather at regulated utilities in the US & Utilities SBU.
Detailed Strategic Overview
AES is leading the industry’s transition to clean energy by investing in sustainable growth and innovative solutions, while delivering superior results. The Company is taking advantage of favorable trends in clean power generation, transmission and distribution, and LNG infrastructure to grow the profitability of its business.
Sustainable Growth: Through its presence in key growth markets, AES is well-positioned to benefit from the global transition toward a more sustainable power generation mix.
— In the first quarter of 2020, the Company completed construction of 1,409 MW of new projects, including:
– 1,299 MW Southland Repowering in Southern California;
– 100 MW Vientos Bonaerenses wind facility in Argentina; and
– 10 MW of solar and solar plus storage in the US at AES Distributed Energy.
— In year-to-date 2020, the Company signed 685 MW of renewables under long-term Power Purchase Agreements (PPA):
– 522 MW of wind and solar at AES Gener in Chile;
– 108 MW of energy storage, solar and solar plus storage in the US; and
– 55 MW of wind in Panama.
The Company’s backlog of 5,345 MW includes:
1,764 MW under construction and expected on-line through 2021; and
3,581 MW of renewables signed under long-term PPAs.
Innovative Solutions: The Company is developing and deploying innovative solutions such as battery-based energy storage, digital customer interfaces and energy management.
— The Company’s joint venture with Siemens, Fluence, is the global leader in the fast-growing energy storage market, which is expected to increase by 15 to 20 GW annually.
– Fluence has been awarded 32 MW of projects in year-to-date 2020, bringing its total backlog to 1.3 GW.
Superior Results: By investing in sustainable growth and offering innovative solutions to customers, the Company is transforming its business mix to deliver superior results.
— As of March 31, 2020, the Company had $3.3 billion of available liquidity. This includes $2.5 billion of cash and cash equivalents, restricted cash and short-term investments, as well as $0.8 billion available under committed credit lines.
— The Company is executing on $100 million in annual run rate cost savings from digital initiatives, including utilizing data and technology for maintenance, outage prevention, inspection and procurement, to be fully realized by 2022.
— The Company remains committed to reducing its coal-fired generation below 30% of total generation volume by year-end 2020 and to less than 10% by year-end 2030.
Guidance and Expectations1
The Company is reducing the mid-point of its 2020 Adjusted EPS guidance by 5%, or $0.07 per share, to a range of $1.32 to $1.42. This reduction is primarily driven by lower demand across its businesses, particularly at its US utilities, which have been negatively impacted by the COVID-19-related economic slowdown that began late in the first quarter of 2020. The Company expects this demand trend to continue through the second quarter, with some improvement in the third quarter and further recovery by year-end 2020. The Company is reaffirming its 2020 Parent Free Cash Flow expectation of $725 million to $775 million.
The Company is also reaffirming its average annual growth rate target of 7% to 9% through 2022 for both Adjusted EPS and Parent Free Cash Flow, off a base of 2018 actuals.
Note 1: Adjusted EPS and Parent Free Cash Flow are non-GAAP financial measures. See attached “Non-GAAP Measures” for definition of Adjusted EPS and see below for definition of Parent Free Cash Flow. The Company is not able to provide a corresponding GAAP equivalent or reconciliation for its Adjusted EPS guidance or its Parent Free Cash Flow expectation without unreasonable effort. See “Non-GAAP measures” for a description of the adjustments to reconcile Adjusted EPS to Diluted EPS for the quarter ended March 31, 2020.