(AES Corp. 3.Mar.2021) — The AES Corporation announced robust near- and long-term goals. “The energy sector is evolving as a result of decarbonization, electrification and digitalization, and AES is uniquely positioned to take advantage of this shift,” said Andrés Gluski, AES President and Chief Executive Officer. “Over the next five years, we will further transform our portfolio by materially accelerating our growth in renewables and at our US utilities. As a result, by 2025 we expect that more than 50% of our earnings will come from the US and more than 65% will come from renewables and our US utilities. Furthermore, today we are accelerating our target to reduce our generation from coal to below 10% by year-end 2025, by five years on a proforma basis, and initiating a target to achieve portfolio-wide net zero carbon emissions from electricity sales by 2040.”
Highlights Through 2025
- Raising renewables growth target by 40% to 3 to 4 GW of long-term PPAs per year
- Increasing investments at US utilities to achieve annual rate base growth of 9%
- Accelerating goal to reduce coal generation to below 10% by 2025 on a proforma basis, five years earlier than the prior expectation
- Continuing to strengthen balance sheet and targeting BBB credit metrics
- Extending 7% to 9% average annual growth target for Adjusted EPS and Parent Free Cash Flow, from a 2020 base
- Maintaining 4% to 6% annual dividend growth, subject to Board approval
Other Key Developments
- Schneider Electric and private investors agree to invest in Uplight, valuing the business at $1.5bn and AES’ stake at approximately $450mn
- AES Gener signed a Memorandum of Understanding with an established international hydrogen producer to conduct a feasibility study for the first large green hydrogen-based ammonia project in Chile
- Setting a new target to achieve portfolio-wide net zero carbon emissions from electricity sales by 2040
“We continue to focus on delivering a compelling total return to shareholders and to that end, today, we are extending our target for 7% to 9% average annual growth in Adjusted EPS and Parent Free Cash Flow through 2025. This reflects the highly contracted nature of our portfolio and the attractive investment opportunities we are seeing in renewables, US utilities and LNG infrastructure,” said Gustavo Pimenta, AES Executive Vice President and Chief Financial Officer. “At the same time, we will continue to strengthen our balance sheet by growing our cash flow to achieve and maintain BBB credit metrics.”
Uplight, an equity method investment of AES, is the technology partner of energy providers transitioning to the clean energy ecosystem, announced today that it has signed an investment agreement with a consortium of investors, including Schneider Electric (EURONEXT: SU), and private investors, including Coatue Management and Inclusive Capital Partners. This transaction values Uplight at $1.5 billion and following closing, AES’ effective economic interest in Uplight will be approximately 30%. This transaction is subject to regulatory approvals and customary closing conditions.
AES Gener signed a Memorandum of Understanding in February 2021 with an established international hydrogen producer to conduct a feasibility study for the first large green hydrogen-based ammonia project in Chile. This project has the potential to require more than 800 MW of new renewable energy supply.
Guidance and Expectations1
The company is extending its average annual growth rate target of 7% to 9% through 2025 for both Adjusted EPS and Parent Free Cash Flow, from a 2020 base.
The Company’s average annual growth through 2025 is expected to be primarily driven by: contributions from annual renewables additions of 3 to 4 GW; rate base growth at US utilities; investments in LNG infrastructure in the Company’s Mexico, Central America and the Caribbean Strategic Business Unit (SBU) and in Vietnam; and growth at existing businesses. The company’s average annual growth rate target through 2025 also includes the impact from contract roll-offs through 2025, and announced asset sales and additional retirements in order to achieve the company’s 2025 decarbonization goal.
The company is also reaffirming its 2021 guidance for Adjusted EPS of $1.50 to $1.58, compared to 2020 Adjusted EPS of $1.44. The company is also reaffirming its expectation for 2021 Parent Free Cash Flow of $775 to $825mn, compared to 2020 Parent Free Cash Flow of $777mn.
1 Adjusted EPS and Parent Free Cash Flow are non-GAAP financial measures. The company is not able to provide corresponding GAAP equivalent or reconciliation for its Adjusted EPS guidance and Parent Free Cash Flow expectations without unreasonable effort.
The company is also accelerating its goal to reduce coal generation to below 10% by 2025 on a proforma basis2, five years earlier than its prior expectation. Additionally, the company is setting a new target to achieve portfolio-wide net zero carbon emissions from electricity sales by 2040.
2 Based on annual generation in MWh from the portfolio as of, or expected by the relevant date, adjusted for: (i) (+) generation from new assets added to the portfolio; and (ii) (-) actual generation from announced asset sales or retirements.
Conference Call Information
AES will host a Virtual Investor Day on Wednesday, 3 March 2021 at 9:00 a.m. Eastern Standard Time (EST). It will be open to the media and the public in listen-only mode by telephone and webcast. Interested parties may listen to the teleconference by dialing 1-888-317-6003 at least ten minutes before the start of the call. International callers should dial +1-412-317-6061. The Conference ID for this call is 9119894. Internet access to the event and presentation materials will be available on the AES website at www.aes.com by selecting “Investors” and then “Presentations and Webcasts.”
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 event.