| AES Reports Strong First Quarter Results |
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ARLINGTON, Va.--June 21, 2007--The AES Corporation (NYSE:AES) today reported strong first quarter 2007 results. Revenues increased 11% to $3.1 billion compared to $2.8 billion for the first quarter of 2006, while net cash from operating activities increased 14% to $581 million compared to $509 million last year. First quarter income from continuing operations was $119 million, or $0.18 earnings per diluted share. The quarterly results were in line with the Company's expectations excluding a non-cash charge of $35 million, or $0.05 impact on diluted earnings per share, due to an impairment of a minority investment, and a charge of $22 million, or $0.03 impact on diluted earnings per share, relating to a litigation reserve as a result of a court ruling at our subsidiary in Kazakhstan. Adjusted earnings per share (a non-GAAP financial measure) were $0.24 for the quarter and include the $0.03 charge at our subsidiary in Kazakhstan. These results compare to 2006 first quarter income from continuing operations of $330 million, or $0.49 earnings per diluted share, and adjusted earnings per share of $0.39. First quarter 2006 results included a one-time $87 million gain or $0.13 positive impact on diluted earnings per share associated with the sale of Kingston in Ontario and the sale of an additional $39 million or $0.05 positive impact on diluted earnings per share in excess emission sales. As anticipated and previously disclosed, the Company recognized an impairment charge of approximately $638 million, or $0.94 impact on diluted earnings per share, in connection with the sale of its equity stake in its Venezuelan subsidiary C.A. La Electricidad de Caracas (EDC), now included in discontinued operations. Including these charges, the Company incurred a net loss of $455 million, or $0.67 diluted loss per share. This compares to net income of $348 million, or $0.52 earnings per diluted share in first quarter 2006. During the quarter, AES continued to execute its growth plans. The Company signed a Memorandum of Understanding and subsequently entered into a partnership with GE Energy Financial Services to develop greenhouse gas emission reduction projects in the United States. The Company also acquired two new power plants with long-term power agreements in Tamuin, Mexico totaling 460 MW of capacity. "The quarter reflected strong revenues, cash flow and underlying operating performance," said Paul Hanrahan, AES President and CEO. "We continued to implement our growth strategy focusing on meeting increasing demand for energy in fast-growing markets while expanding our presence in renewables and the growing market for emission offsets."
First Quarter 2007 Consolidated Highlights
-- Revenues increased by $304 million to $3.1 billion, reflecting
higher prices and increased demand primarily in Latin America,
the acquisition of two new facilities in Mexico and the
consolidation of Itabo, one of the Company's businesses in the
Dominican Republic, and favorable foreign currency
translation.
-- Gross margin decreased by $49 million to $868 million,
primarily due to the benefit of higher emission sales of $39
million recorded in first quarter 2006 and $32 million cost
recoveries related to prior periods in the first quarter of
2006 at Eletropaulo in Brazil. This was partially off-set by
favorable foreign currency translation, contributions from the
two new facilities in Mexico and the consolidation of Itabo,
and improved operating performance at various subsidiaries.
-- General and administrative expense increased $28 million to
$85 million, largely from higher spending related to the
strengthening of our financial organization, completion of our
recent restatement and increased business development
activities to support our growth initiatives.
-- Interest expense increased by $4 million to $422 million,
reflecting debt at recently acquired businesses, including the
two new facilities in Mexico, interest on regulatory
liabilities in Brazil and losses on interest rate derivatives.
These increases were partially offset by debt retirements and
lower interest rates at our Brazil subsidiaries.
-- Other expense decreased $37 million to $41 million, largely
due to costs associated with debt retirements at the parent
company and at our businesses in El Salvador during the first
quarter of 2006, partially offset by a $22 million charge in
first quarter of 2007 related to a court ruling at our
subsidiary in Kazakhstan.
-- Gain on sale of investment decreased by $86 million due to the
sale of AES Kingston, a 110 MW power plant in Ontario, Canada
that resulted in a gain of $87 million in the first quarter of
2006.
-- Other non-operating expense increased by $39 million to $39
million, largely due to a $35 million impairment in the
Company's minority investment in AgCert International. An
impairment was determined to exist due to the application of
accounting rules relating to an "other than temporary" decline
in AgCert's stock price performance during the first quarter
of 2007.
-- The effective tax rate during the quarter was 41% as compared
to 31% in 2006. This increase was primarily due to a change in
tax law in China, unfavorable tax impacts of the charges
associated with the impairment of our investment in AgCert and
with the court ruling in Kazakhstan, and a favorable impact in
the first quarter of 2006 associated with the non-taxable sale
of Kingston, offset by a tax benefit recorded upon the release
of a valuation allowance at one of our subsidiaries in
Argentina.
-- Income from continuing operations for the first quarter of
2007 was $119 million, or $0.18 diluted earnings per share,
versus $330 million, or $0.49 diluted earnings per share for
the first quarter of 2006. Adjusted earnings per share for the
first quarter of 2007 were $0.24 compared to $0.39 in first
quarter 2006.
-- During the quarter, free cash flow (a non-GAAP financial
measure) increased by $68 million to $377 million, primarily
due to decreases in net working capital, lower cash tax
payments and contributions from the two new facilities in
Mexico and the consolidation of Itabo.
First Quarter 2007 Segment Highlights
-- Latin America Generation revenue increased by $139 million to
$738 million, primarily due to higher contract and spot prices
at Gener in Chile, the consolidation of Itabo in the Dominican
Republic, and increased energy prices in Argentina. Gross
margin decreased by $9 million to $250 million, primarily due
to increased purchased electricity and fuel costs at
Uruguaiana in Brazil and Gener in Chile and higher fixed costs
at Gener, partially offset by the consolidation of Itabo and
variable margin on the increased revenues in Argentina.
-- Latin America Utility revenue increased by $73 million to $1.2
billion, primarily due to the positive impact of foreign
currency translation in Brazil and higher tariff rates at
Eletropaulo and Sul in Brazil and CAESS-EEO in El Salvador.
Gross margin decreased by $19 million to $210 million,
primarily due to prior period costs recovered through the
tariff in first quarter 2006 at Eletropaulo in Brazil,
partially offset by favorable foreign currency translation and
the favorable tariff rates at Sul and CAESS-EEO.
-- North America Generation revenue increased by $17 million to
$510 million, primarily due to the acquisition of the two new
facilities in Mexico, higher spot prices at Eastern Energy in
New York and planned outages at Warrior Run in Maryland and
AES Hawaii in first quarter 2006. These gains were mostly
offset by lower emission sales in New York and outages at
Merida in Mexico and at Deepwater in Texas. Gross margin
decreased by $20 million to $154 million, primarily due to
lower emission sales at Eastern Energy in New York.
-- North America Utility revenue increased by $8 million to $263
million, primarily due to higher volumes at IPL in Indiana.
Gross margin increased by $17 million to $81 million primarily
due to higher volume and lower maintenance costs associated
with generation unit overhauls in first quarter of 2006 at
IPL.
-- Europe & Africa Generation revenue increased by $44 million to
$252 million, primarily due to higher volume and prices in
Kazakhstan, favorable foreign currency translation and higher
volume and prices in Hungary. Gross margin increased by $10
million to $90 million, primarily due to higher revenues in
Kazakhstan and favorable foreign currency translation,
partially offset by lower emission sales at Bohemia in Czech
Republic.
-- Europe & Africa Utility revenue increased by $14 million to
$166 million, primarily due to higher tariff rates in Ukraine
and foreign currency translation gains. Gross margin decreased
by $19 million to $17 million due to reduced rainfall in
Cameroon which led to increased fuel costs and an unfavorable
derivative mark-to-market variance at AES SONEL in Cameroon.
Additionally, AES SONEL experienced higher fixed costs related
to increased staffing and higher depreciation.
-- Asia Generation revenue increased by $18 million to $212
million, primarily due to higher volume in Pakistan and an
outage at Ras Laffan in Qatar in 2006, partially offset by
lower volumes in Sri Lanka. Gross margin decreased by $5
million to $58 million, primarily due to lower volumes in Sri
Lanka and higher planned maintenance costs at Barka in Oman.
Non-GAAP Financial Measures
See Non-GAAP Financial Measures for definitions of adjusted earnings per share and free cash flow and reconciliations to the most comparable GAAP financial measure. Attachments Condensed Consolidated Statements of Operations, Segment Information, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Non-GAAP Financial Measures, Parent Financial Information. Conference Call Information AES will host a conference call on Thursday, June 21, 2007 at 8:30 a.m. Eastern Daylight Time (EDT). The call may be accessed via a live webcast which will be available at www.aes.com by selecting "Investor Information" and then "Quarterly Financial Results" or by telephone in listen-only mode at (888)-802-7346. International callers should dial (973)-582-2785. Please call at least ten minutes before the scheduled start time. You will be requested to provide your name and affiliation. The AES Financial Review presentation will be available prior to the call at www.aes.com by selecting "Investor Information" and then "Quarterly Financial Results." A telephonic replay will be available at approximately 12:00 p.m. EDT by dialing (877)-519-4471 or (973)-341-3080 for international callers. The system will ask for a reservation number; please enter 8931602 followed by the pound key (#). The telephonic replay will be available until July 11, 2007. 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 AES is one of the world's largest global power companies, with 2006 revenues of $12.3 billion. With operations in 28 countries on five continents, AES's generation and distribution facilities have the capacity to serve 100 million people worldwide. Our 13 utilities amass annual sales of over 73,000 GWh and our 121 generation facilities have the capacity to generate approximately 40,000 megawatts. Our global workforce of 32,000 people is committed to operational excellence and meeting the world's growing power needs. To learn more about AES, please visit www.aes.com or contact AES media relations at media@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's current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to, 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's filings with the Securities and Exchange Commission, including, but not limited to, the risks discussed under Item 1A "Risk Factors" in AES's 2006 Annual Report on Form 10-K. Readers are encouraged to read AES's filings to learn more about the risk factors associated with AES's business. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
THE AES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended
March 31,
($ in millions, except per share amounts) 2007 2006 (Restated)
--------------------------
Revenues $3,121 $2,817
Cost of sales (2,253) (1,900)
---------- ---------------
GROSS MARGIN 868 917
General and administrative expenses (85) (57)
Interest expense (422) (418)
Interest income 100 114
Other expense (41) (78)
Other income 39 19
Gain on sale of investments 1 87
Foreign currency transaction losses on net
monetary position - (23)
Equity in earnings of affiliates 20 36
Other non-operating expense (39) -
---------- ---------------
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST 441 597
Income tax expense (181) (186)
Minority interest expense (141) (81)
---------- ---------------
INCOME FROM CONTINUING OPERATIONS 119 330
Income from operations of discontinued
businesses, net of tax 62 18
Loss from disposal of discontinued
businesses, net of tax (636) -
---------- ---------------
NET (LOSS) INCOME $(455) $348
========== ===============
DILUTED (LOSS) EARNINGS PER SHARE
Income from continuing operations $0.18 $0.49
Discontinued operations (0.85) 0.03
---------- ---------------
DILUTED (LOSS) EARNINGS PER SHARE $(0.67) $0.52
========== ===============
Diluted weighted average shares outstanding
(in millions) 677 688
========== ===============
THE AES CORPORATION
SEGMENT INFORMATION (unaudited)
Three Months Ended
March 31,
($ in millions) 2007 2006 (Restated)
-------------------------
REVENUES
Latin America Generation $738 $599
Latin America Utilities 1,177 1,104
North America Generation 510 493
North America Utilities 263 255
Europe & Africa Generation 252 208
Europe & Africa Utilities 166 152
Asia Generation 212 194
Corp/Other & eliminations (197) (188)
--------- ---------------
Total revenues $3,121 $2,817
GROSS MARGIN
Latin America Generation $250 $259
Latin America Utilities 210 229
North America Generation 154 174
North America Utilities 81 64
Europe & Africa Generation 90 80
Europe & Africa Utilities 17 36
Asia Generation 58 63
Corp/Other & eliminations 8 12
--------- ---------------
Total gross margin $868 $917
INCOME BEFORE INCOME TAXES AND MINORITY
INTEREST
Latin America Generation $215 $238
Latin America Utilities 167 126
North America Generation 86 209
North America Utilities 50 34
Europe & Africa Generation 73 87
Europe & Africa Utilities 12 33
Asia Generation 41 44
Corp/Other & eliminations (203) (174)
--------- ---------------
Total income before income taxes and
minority interest $441 $597
THE AES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
March 31, December 31,
($ in millions, except shares and par value) 2007 2006
----------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $1,448 $1,379
Restricted cash 496 548
Short term investments 854 640
Accounts receivable, net of reserves of $239
and $233, respectively 1,860 1,769
Inventory 496 471
Receivable from affiliates 82 76
Deferred income taxes - current 228 208
Prepaid expenses 149 109
Other current assets 877 927
Current assets of held for sale and
discontinued businesses 344 438
----------------------
Total current assets 6,834 6,565
PROPERTY, PLANT AND EQUIPMENT
Land 952 928
Electric generation and distribution assets 22,822 21,835
Accumulated depreciation (6,815) (6,545)
Construction in progress 1,256 1,008
----------------------
Property, plant and equipment, net 18,215 17,226
OTHER ASSETS
Deferred financing costs, net of accumulated
amortization of $193 and $188, respectively 271 279
Investment in and advances to affiliates 608 595
Debt service reserves and other deposits 520 524
Goodwill, net 1,429 1,416
Other intangible assets, net of accumulated
amortization of $185 and $172, respectively 320 298
Deferred income taxes - noncurrent 654 602
Other assets 1,635 1,606
Noncurrent assets of held for sale and
discontinued businesses 1,469 2,052
----------------------
Total other assets 6,906 7,372
----------------------
TOTAL ASSETS $31,955 $31,163
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $897 $795
Accrued interest 422 404
Accrued and other liabilities 2,137 2,131
Non-recourse debt - current portion 1,310 1,411
Current liabilities of held for sale and
discontinued businesses 256 278
----------------------
Total current liabilities 5,022 5,019
LONG-TERM LIABILITIES
Non-recourse debt 10,722 9,834
Recourse debt 4,939 4,790
Deferred income taxes - noncurrent 1,095 800
Pension liabilities and other post-retirement
liabilities 864 844
Other long-term liabilities 3,067 3,312
Long-term liabilities of held for sale and
discontinued businesses 431 428
----------------------
Total long-term liabilities 21,118 20,008
Minority Interest (including discontinued
businesses of $148 and $175, respectively) 3,270 3,100
STOCKHOLDERS' EQUITY
Common stock ($.01 par value, 1,200,000,000
shares authorized; 667,010,861 and
665,126,309 shares issued and outstanding,
respectively) 7 7
Additional paid-in capital 6,688 6,654
Accumulated deficit (1,533) (1,025)
Accumulated other comprehensive loss (2,617) (2,600)
----------------------
Total stockholders' equity 2,545 3,036
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $31,955 $31,163
======================
THE AES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended March 31,
($ in millions) 2007 2006 (Restated)
------------ ---------------
OPERATING ACTIVITIES
Net cash provided by operating
activities $581 $509
INVESTING ACTIVITIES
Capital expenditures (476) (242)
Acquisitions, net of cash acquired (174) -
Proceeds from the sales of businesses - 110
Proceeds from the sales of assets 2 4
Sale of short-term investments 326 276
Purchase of short-term investments (470) (448)
Increase in restricted cash (14) (53)
Purchase of emission allowances (1) (12)
Proceeds from the sales of emission
allowances 9 45
Decrease in debt service reserves and
other assets 117 10
Purchase of long-term available-for-
sale securities (8) -
Other investing 12 11
------------ ---------------
Net cash used in investing activities (677) (299)
FINANCING ACTIVITIES
Borrowings (repayments) under the
revolving credit facilities, net 186 11
Issuance of non-recourse debt 370 329
Repayments of recourse debt - (150)
Repayments of non-recourse debt (370) (548)
Payments for deferred financing costs (4) (16)
Distributions to minority interests (54) (16)
Contributions from minority interests 9 -
Issuance of common stock 14 8
Financed capital expenditures (4) -
Other financing 1 -
------------ ---------------
Net cash provided by (used in)
financing activities 148 (382)
Effect of exchange rate changes on
cash 17 36
------------ ---------------
Total increase (decrease) in cash and
cash equivalents 69 (136)
Cash and cash equivalents, beginning 1,379 1,176
------------ ---------------
Cash and cash equivalents, ending $1,448 $1,040
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THE AES CORPORATION
NON-GAAP MEASURES (unaudited)
Three Months Ended
March 31,
($ in millions, except per share amounts) 2007 2006 (Restated)
---------------------------
Diluted EPS From Continuing Operations $0.18 $0.49
FAS 133 Mark to Market (Gains)/Losses 0.01 (0.01)
Currency Transaction (Gains)/Losses - -
Net Asset (Gains)/Losses and Impairments 0.05 (0.13)
Debt Retirement (Gains)/Losses - 0.04
----------- ---------------
Adjusted Earnings Per Share (1) $0.24 $0.39
=========== ===============
----------------------------------------------------------------------
Capital Expenditures
Maintenance Capital Expenditures $204 $200
Growth Capital Expenditures 276 42
----------- ---------------
Total Capital Expenditures $480 $242
=========== ===============
----------------------------------------------------------------------
Reconciliation of Free Cash Flow
Net Cash from Operating Activities $581 $509
Less: Maintenance Capital Expenditures 204 200
----------- ---------------
Free Cash Flow (2) $377 $309
=========== ===============
(1) Adjusted earnings per share (a non-GAAP financial measure) is
defined as diluted earnings per share from continuing operations
excluding gains or losses associated with (a) mark-to-market amounts
related to FAS 133 derivative transactions, (b) foreign currency
transaction impacts on the net monetary position related to Brazil,
Venezuela, and Argentina, (c) significant asset gains or losses due
to disposition transactions and impairments, and (d) costs related to
the early retirement of recourse debt. AES believes that adjusted
earnings per share better reflects the underlying business
performance of the Company, and is considered in the Company's
internal evaluation of financial performance. Factors in this
determination include the variability associated with mark-to-market
gains or losses related to certain derivative transactions, currency
transaction gains or losses, periodic strategic decisions to dispose
of certain assets which may influence results in a given period, and
the early retirement of corporate debt.
(2) Free cash flow (a non-GAAP financial measure) is defined as net
cash from operating activities less maintenance capital expenditures.
AES believes that free cash flow is a useful measure for evaluating
our financial condition because it represents the amount of cash
provided by operations less maintenance capital expenditures as
defined by our businesses, that may be available for investing or for
repaying debt.
THE AES CORPORATION
PARENT FINANCIAL INFORMATION
----------------------------------------------------------------------
Parent only data: last four quarters
($ in millions)
4 Quarters Ended
Total subsidiary March 31, December 31, September 30, June 30,
distributions & returns 2007 2006 2006 2006
of capital to Parent Actual Actual Actual Actual
------------------------ ---------------------------------------------
Subsidiary distributions
(1) to Parent $976 $971 $1,014 $937
Returns of capital
distributions to Parent 87 72 68 34
--------- ------------ ------------- --------
Total subsidiary
distributions & returns
of capital to parent $1,063 $1,043 $1,082 $971
========= ============ ============= ========
Parent only data: quarterly
($ in millions)
Quarter Ended
Total subsidiary March 31, December 31, September 30, June 30,
distributions & returns 2007 2006 2006 2006
of capital to Parent Actual Actual Actual Actual
------------------------ ---------------------------------------------
Subsidiary distributions
to Parent $137 $311 $352 $177
Returns of capital
distributions to Parent 15 9 34 29
--------- ------------ ------------- --------
Total subsidiary
distributions & returns
of capital to Parent $152 $320 $386 $206
========= ============ ============= ========
Liquidity (3) Balance at
------------------------
($ in millions) March 31, December 31, September 30, June 30,
2007 2006 2006 2006
Actual Actual Actual Actual
---------------------------------------------
Cash at Parent $54 $237 $172 $71
Availability under
revolver 804 889 764 567
Cash at QHCs (2) 20 20 37 7
--------- ------------ ------------- --------
Ending liquidity $878 $1,146 $973 $645
========= ============ ============= ========
(1) Subsidiary Distributions (a non-GAAP financial measure) is defined
as cash distributions (primarily dividends and interest income) from
subsidiary companies to the parent company and qualified holding
companies. These cash flows are the source of cash flow to the
parent.
(2) The cash held at qualifying holding companies (QHCs) (a non-GAAP
financial measure) represents cash sent to subsidiaries of the
company domiciled outside of the US. Such subsidiaries had no
contractual restrictions on their ability to send cash to AES, the
Parent Company (Parent). Cash at those subsidiaries was used for
investment and related activities outside of the US. These
investments included equity investments and loans to other foreign
subsidiaries as well as development and general costs and expenses
incurred outside the US. Since the cash held by these QHCs is
available to the Parent, AES uses the combined measure of subsidiary
distributions to Parent and QHCs as a useful measure of cash
available to the Parent to meet its international liquidity needs.
(3) AES believes that unconsolidated parent company liquidity (a non-
GAAP financial measure) is important to the liquidity position of AES
as a parent company because of the non-recourse nature of most of
AES's indebtedness.
CONTACT: AES Corporation |
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