AES Reports Net Income Of $501 Million In Q1 2009

Monday, May 11, 2020

The AES Corporation (AES) has reported revenues of $3.4 billion for the first quarter of 2009, compared with the revenues of $4.1 billion in the year-ago quarter. It has also reported a net income of $501 million, or $0.33 per diluted share, for the first quarter of 2009, compared with the net income of $408 million, or $0.34 per diluted share, in the year-ago quarter.

“We are pleased that AES’s share of free cash flow increased by $40 million as a result of improvements in working capital and expense reductions. Accordingly, we are reaffirming our 2009 earnings and proportional cash flow guidance. However, like other global companies, we are not immune to volatile foreign exchange rates or lower market prices, which will have an impact on working capital in Brazil and the Dominican Republic that will decrease the 2009 consolidated cash flow range by five percent,” said Paul Hanrahan, president and chief executive officer. “With more than 95 percent of our more than 3,000 MW construction program contracted under long-term agreements and fully financed, we expect these projects to significantly contribute to our cash flow over the next three years.”

In addition, AES undertook a series of capital structure transactions in the quarter which will improve liquidity through 2010 and beyond. Regarding these initiatives, Victoria D. Harker, executive vice president and chief financial officer, said, “Over the past several months, we continued to enhance our corporate liquidity through refinancings of $1.3 billion, which extended our debt maturities well beyond 2009. This included a renegotiation of our senior secured credit facility and a $535 million bond offering. These proceeds were used to reduce our $600 million unsecured credit facility, which will no longer be needed. At the subsidiary level, AES Gener’s $196 million bond offering provided the funds needed to complete the construction projects in Chile.”

First Quarter 2009 Financial Highlights (comparison of Q1 2009 vs. Q1 2008):

— Quarter over quarter, the company experienced foreign currency exchange losses of $130 million, and a $63 million margin reduction due to lower electricity prices and volume at several generation businesses. Additionally, as a result of the sale of our Northern Kazakhstan businesses in 2008, there was a $26 million reduction of gross margin. There were several offsetting improvements from Latin America generation and North America utilities, as well as reduced operating expenses overall. Key factors were:

— Consolidated cash flow from operating activities of $376 million, compared to $470 million in 2008; primarily reflecting lower gross margin and changes in working capital; 2009 cash flow results do not include the $80 million from Kazakhstan management services in 2008 recognized as income in first quarter but not received until April 2009.

— Proportional cash flow from operating activities (a non-GAAP financial measure, see Appendix for definition and reconciliation) of $323 million, compared to $287 million in the first quarter of 2008, primarily driven by improvements in working capital at the company’s Asia Generation businesses. Proportional free cash flow from operating activities reflects the economic interest of AES in the consolidated results.

— Consolidated Free Cash Flow (a non-GAAP financial measure, see Appendix for definition and reconciliation) of $220 million, compared to $291 million in 2008, 2009 results reflect lower consolidated operating cash flow offset in part by reduced maintenance capital expenditures.

— Proportional free cash flow (a non-GAAP financial measure, see Appendix for definition and reconciliation), of $203 million, versus $163 million for the same period last year. Proportional free cash flow reflects the economic interest of AES in the consolidated results.

— Consolidated revenues decreased $703 million or 17% to $3.4 billion, primarily due to unfavorable foreign currency exchange rates of $578 million, of which around $400 million, or 69%, relates to devaluation of the Brazilian Real.

— Consolidated gross margin, which decreased $159 million or 15% to $883 million, due to unfavorable movements in foreign currency exchange rates of $130 million and lower electricity prices and volume at several generation businesses of $63 million. This decline was offset in part by improved operations across the company’s global portfolio and higher availability at several generation businesses.

— Proportional gross margin (a non-GAAP financial measure, see Appendix for definition and reconciliation), declined by $152 million, or 22% due to lower electricity prices in New York and Argentina, the lack of contribution from the Northern Kazakhstan businesses sold in 2008, and unfavorable foreign currency exchange rates.

— Diluted earnings from continuing operations of $0.33 per share, compared to $0.34 per share in 2008; the decrease was primarily driven by unfavorable impacts of foreign currency, offset in part by an $80 million or $0.12 per share performance incentive bonus, recognized as other income, associated with the management of the Company’s Northern Kazakhstan assets sold in 2008.

— Net Income attributable to AES of $218 million or $0.33 per share, compared to $233 million or $0.34 per share in 2008.

— Adjusted Earnings Per Share (a non-GAAP financial measure, see Appendix for definition and reconciliation) increased from $0.35 to $0.37; 2009 results exclude $0.03 of non-cash, unrealized foreign currency transaction losses.

Key 2009 Highlights:

— Finalized agreement with Kazakhmys PLC to end management of the Northern Kazakhstan businesses sold in 2008, for $182 million in Total consideration, including a performance incentive bonus for 2008 management services. Of the $182 million, $80 million was received in April 2009; in January 2010 the balance will be received, which will be backed by investment grade letters of credit to be executed in the second quarter of 2009.

— Increased senior secured Revolver availability by $35 million to $785 million and extended the maturity date of $605 million of Revolver commitments from June 23, 2020 to July 5, 2020.

— Strengthened parent company liquidity (a non-GAAP financial measure) by issuing $535 million of 9.75% senior unsecured notes due 2016, netting proceeds of around $492 million; majority of proceeds used to replace $425 million of senior unsecured facility maturing in 2010.

— The company’s subsidiary, AES Gener, has issued $196 million of 8.50% ten year bonds to fund its construction program in Chile.

— Made substantive progress on the company’s more than 3,000 MW construction program. Commenced commercial operation of 130 MW Santa Lidia diesel facility in Chile.

— Expanded solar portfolio by 8 MW in Spain through AES Solar Energy, the company’s joint venture with Riverstone, increasing Total solar capacity to 32 MW.

2009 Guidance

— The company is reaffirming its full year 2009 guidance for adjusted earnings per share, proportional cash flow from operating activities and proportional free cash flow.

— The Company is lowering its guidance range for consolidated cash flow from operating activities and consolidated free cash flow, which is being decreased by $100 million primarily due to working capital changes in Brazil. The revised Consolidated Operating Free Cash Flow guidance range for the full year is $2.0 to $2.2 billion; the guidance range for consolidated free cash flow (a non-GAAP financial measure) is $1.3 to $1.5 billion.