(AES, 4.May.2023) — The AES Corporation (NYSE: AES) reported financial results for the quarter ended March 31, 2023.
- On track to complete 2023 construction projects of more than 3 GW of renewables
- AES Ohio signed a comprehensive settlement for its Electric Security Plan (ESP4), providing the regulatory foundation necessary to drive future growth
- Announced next decarbonization milestone with the agreement to terminate the PPA for the 205 MW Warrior Run coal plant in Maryland, for a total payments of $357mn
- Signed agreements to extend the operation of 1.4 GW of gas generation at the Southland legacy units in Southern California for three more years
Q1 2023 Financial Highlights
- Diluted EPS of $0.21, compared to $0.16 in Q1 2022
- Adjusted EPS1 of $0.22, compared to $0.21 in Q1 2022
- Net Income of $189mn, compared to $171mn in Q1 2022
- Added Adjusted EBITDA2 metric to disclosures
- Adjusted EBITDA2 of $628mn, compared to $621mn in Q1 2022
Financial Position and Outlook
- Reaffirming 2023 guidance for Adjusted EPS1 of $1.65 to $1.75 and 7% to 9% annualized growth target1 through 2025, off a base year of 2020
“Our first quarter results put us on track to meet our 2023 guidance and longer-term growth rates,” said Andrés Gluski, AES President and Chief Executive Officer. “The settlement agreement of AES Ohio’s rate case and the termination of Warrior Run’s thermal PPA for $357mn, materially advance our strategic objectives of growing our US utilities by double digits and decarbonizing our portfolio. I am also pleased to announce our four new Strategic Business Units, which better reflect the greatly simplified company that AES is today.”
“I am excited about our financial performance and strategic accomplishments so far this year, which position us well to achieve or exceed our goals in this year and beyond,” said Stephen Coughlin, AES Executive Vice President and Chief Financial Officer. “At our Investor Day this Monday, May 8th, we will provide greater detail around our new SBUs, new metrics, and our longer-term growth expectations.”
New Strategic Business Units (SBU)
AES is a diversified power generation and utility company organized into four SBUs: Renewables (solar, wind, energy storage, hydro, biomass and landfill gas); Utilities (AES Indiana, AES Ohio and AES El Salvador); Energy Infrastructure3 (natural gas, LNG, coal, pet coke, diesel and oil); and New Energy Technologies (the development of green hydrogen, Fluence, Uplight and 5B).
Q1 2023 Financial Results
First quarter 2023 Net Income was $189mn, an increase of $18mn compared to first quarter 2022. This increase is the result of favorable contributions from the Energy Infrastructure and New Energy Technology Strategic Business Units (SBU), partially offset by lower contributions from the Utilities and Renewables SBUs.
First quarter 2023 Adjusted EBITDA2 (a non-GAAP financial measure) was $628mn, an increase of $7mn compared to first quarter 2022, primarily reflecting favorable wind and hydrology conditions, and new businesses at the Renewables SBU, favorable LNG transactions at the Energy Infrastructure SBU, and lower losses at the New Energy Technologies SBU due to reduced shipping constraints and costs, as well as fewer project delays. These positive drivers were partially offset by unfavorable weather conditions impacting demand at the Utilities SBU.
First quarter 2023 Diluted Earnings Per Share from Continuing Operations (Diluted EPS) was $0.21, an increase of $0.05 compared to first quarter 2022, primarily reflecting favorable LNG transactions at the Energy Infrastructure SBU, new businesses at the Renewables SBU, and lower losses of affiliates at the New Energy Technologies SBU, partially offset by lower margins due to unfavorable weather conditions at the Utilities SBU.
First quarter 2023 Adjusted Earnings Per Share1 (Adjusted EPS, a non-GAAP financial measure) was $0.22, an increase of $0.01, compared to first quarter 2022, mainly driven by the same drivers above, adjusted for Noncontrolling Interests, and a lower adjusted tax rate.
- As of the end of the first quarter of 2023, the company’s backlog, which includes projects with signed contracts, but which are not yet operational, was 11,932 MW, including 5,627 MW under construction. This is compared to a 12,179 MW backlog as of year-end 2022.
- In April 2023, AES Ohio signed a comprehensive settlement with the Public Utilities Commission of Ohio (PUCO) for its Electric Security Plan (ESP4), providing the regulatory foundation necessary to enable future growth. The settlement is expected to be approved by the PUCO in the third quarter of 2023.
- In April 2023, the company announced its next decarbonization milestone with the agreement to terminate the PPA for the 205 MW Warrior Run coal plant in Maryland, for a total consideration of $357mn, subject to approval by the Maryland Public Service Commission (PSC). AES will continue to operate the plant through at least May 2024, after which the company sees interesting opportunities to repurpose the site for low carbon solutions that will continue to serve local communities.
- In April 2023, the company signed agreements for three-year extensions of 1.4 GW of gas generation at the Southland legacy units in Southern California. The extension will help meet the State of California’s grid reliability needs while supporting its decarbonization goals.
Guidance and Expectations1
The company is reaffirming its 7% to 9% annualized growth rate target1 through 2025, from a base year of 2020.
The company is reaffirming its 2023 guidance for Adjusted EPS1 of $1.65 to $1.75. Growth in 2023 is expected to be primarily driven by 3.4 GW of new renewables expected to come online. This growth is expected to be partially offset by lower margins from the company’s LNG business, due to normalization of LNG prices and the roll-off of a gas supply contract, lower contract margins in Chile, and higher interest expense in Colombia. This guidance also incorporates the impact of 0.6 GW of new renewables likely coming online in 2024, instead of 2023.
The company’s 2023 guidance is based on foreign currency and commodity forward curves as of 31 March 2023.
Non-GAAP Financial Measures
See Non-GAAP Measures for definitions of Adjusted Earnings Per Share, Adjusted Pre-Tax Contribution, Adjusted EBITDA, as well as reconciliations to the most comparable GAAP financial measures.
First Quarter Financial Review Conference Call Information
AES will host a conference call on Friday, 5 May 2023 at 10:00 a.m. Eastern Time (ET). Interested parties may listen to the teleconference by dialing 1-833-470-1428 at least ten minutes before the start of the call. International callers should dial +1-929-526-1599. The Participant Access Code for this call is 382953. Internet access to the conference call 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 call.
2023 Investor Day Webcast Information
AES will hold an Investor Day on Monday, 8 May 2023 at 9:00 a.m. Eastern Time (ET) in New York City. At the event, AES Management will deliver prepared remarks and host a question and answer session with analysts and investors. Interested parties may access the live webcast and presentation materials at www.aes.com by selecting “Investors” and then “Upcoming Events” prior to the start of the event. A replay will be available shortly after the conclusion of the event at www.aes.com by selecting “Investors” and then “Presentations and Webcasts.”
|1||Adjusted EPS is a non-GAAP financial measure. See attached “Non-GAAP Measures” for definition of Adjusted EPS and a description of the adjustments to reconcile Adjusted EPS to Diluted EPS for the quarter ended 31 March 2023. The company is not able to provide a corresponding GAAP equivalent or reconciliation for its Adjusted EPS guidance without unreasonable effort.|
|2||Adjusted EBITDA is a non-GAAP financial metric. See attached “Non-GAAP Measures” for definition of Adjusted EBITDA and a description of the adjustments to reconcile Adjusted EBITDA to Net Income for the quarter ended 31 March 2023. The company is not able to provide a corresponding GAAP equivalent or reconciliation for its Adjusted EBITDA guidance without unreasonable effort.|
|3||The company’s businesses in Chile, which have a mix of generation sources, including renewables, are also included within the Energy Infrastructure SBU, as the generation from all sources is pooled to service existing PPAs.|