AES Reports Positive Momentum in First Quarter; Reaffirms 2023 Guidance; Introduces New Strategic Business Units

___________________

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 March 31, 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 March 31, 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.

THE AES CORPORATION
Condensed Consolidated Statements of Operations (Unaudited)

Three Months Ended March 31,

2023

2022

(in millions, except per share amounts)

Revenue:

Non-Regulated

$           2,287

$           2,017

Regulated

952

835

Total revenue

3,239

2,852

Cost of Sales:

Non-Regulated

(1,797)

(1,617)

Regulated

(848)

(705)

Total cost of sales

(2,645)

(2,322)

Operating margin

594

530

General and administrative expenses

(55)

(52)

Interest expense

(330)

(258)

Interest income

123

75

Loss on extinguishment of debt

(1)

(6)

Other expense

(14)

(12)

Other income

10

6

Gain on disposal and sale of business interests

—

1

Asset impairment expense

(20)

(1)

Foreign currency transaction losses

(42)

(19)

INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND EQUITY IN EARNINGS OF
AFFILIATES

265

264

Income tax expense

(72)

(60)

Net equity in losses of affiliates

(4)

(33)

NET INCOME

189

171

Less: Net income attributable to noncontrolling interests and redeemable stock of subsidiaries

(38)

(56)

NET INCOME ATTRIBUTABLE TO THE AES CORPORATION

$              151

$              115

BASIC EARNINGS PER SHARE:

NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS

$             0.22

$             0.17

DILUTED EARNINGS PER SHARE:

NET INCOME ATTRIBUTABLE TO THE AES CORPORATION COMMON STOCKHOLDERS

$             0.21

$             0.16

DILUTED SHARES OUTSTANDING

712

711

THE AES CORPORATION

Strategic Business Unit (SBU) Information

(Unaudited)

Three Months Ended March 31,

(in millions)

2023

2022

REVENUE

Renewables SBU

$                  495

$                  420

Utilities SBU

971

859

Energy Infrastructure SBU

1,724

1,607

New Energy Technologies SBU

74

—

Corporate and Other

27

23

Eliminations

(52)

(57)

Total Revenue

$               3,239

$               2,852

THE AES CORPORATION
Condensed Consolidated Balance Sheets (Unaudited)

March 31,
2023

December 31,
2022

(in millions, except share

and per share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$                 1,441

$                 1,374

Restricted cash

456

536

Short-term investments

822

730

Accounts receivable, net of allowance for doubtful accounts of $5 and $5, respectively

1,859

1,799

Inventory

864

1,055

Prepaid expenses

167

98

Other current assets

1,523

1,533

Current held-for-sale assets

511

518

Total current assets

7,643

7,643

NONCURRENT ASSETS

Property, Plant and Equipment:

Land

477

470

Electric generation, distribution assets and other

27,054

26,599

Accumulated depreciation

(8,882)

(8,651)

Construction in progress

5,564

4,621

Property, plant and equipment, net

24,213

23,039

Other Assets:

Investments in and advances to affiliates

768

952

Debt service reserves and other deposits

180

177

Goodwill

362

362

Other intangible assets, net of accumulated amortization of $455 and $434, respectively

1,862

1,841

Deferred income taxes

324

319

Loan receivable, net of allowance of $25 and $26,  respectively

1,044

1,051

Other noncurrent assets, net of allowance of $46 and $51, respectively

2,961

2,979

Total other assets

7,501

7,681

TOTAL ASSETS

$               39,357

$               38,363

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Accounts payable

$                 1,505

$                 1,730

Accrued interest

296

249

Accrued non-income taxes

289

249

Accrued and other liabilities

2,103

2,151

Recourse debt

500

—

Non-recourse debt, including $314 and $416, respectively, related to variable interest entities

1,737

1,758

Current held-for-sale liabilities

346

354

Total current liabilities

6,776

6,491

NONCURRENT LIABILITIES

Recourse debt

4,081

3,894

Non-recourse debt, including $2,413 and $2,295, respectively, related to variable interest entities

18,513

17,846

Deferred income taxes

1,110

1,139

Other noncurrent liabilities

3,131

3,168

Total noncurrent liabilities

26,835

26,047

Commitments and Contingencies

Redeemable stock of subsidiaries

1,283

1,321

EQUITY

THE AES CORPORATION STOCKHOLDERS' EQUITY

Preferred stock (without par value, 50,000,000 shares authorized; 1,043,050 issued and
outstanding at March 31, 2023 and December 31, 2022)

838

838

Common stock ($0.01 par value, 1,200,000,000 shares authorized; 818,808,272 issued and
669,335,716 outstanding at March 31, 2023 and 818,790,001 issued and 668,743,464
outstanding at December 31, 2022)

8

8

Additional paid-in capital

6,557

6,688

Accumulated deficit

(1,484)

(1,635)

Accumulated other comprehensive loss

(1,742)

(1,640)

Treasury stock, at cost (149,472,556 and 150,046,537 shares at March 31, 2023
and December 31, 2022, respectively)

(1,815)

(1,822)

Total AES Corporation stockholders' equity

2,362

2,437

NONCONTROLLING INTERESTS

2,101

2,067

Total equity

4,463

4,504

TOTAL LIABILITIES AND EQUITY

$               39,357

$               38,363

THE AES CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended March 31,

2023

2022

(in millions)

OPERATING ACTIVITIES:

Net income

$            189

$            171

Adjustments to net income:

Depreciation and amortization

273

270

Gain on disposal and sale of business interests

—

(1)

Impairment expense

20

1

Deferred income taxes

(11)

(7)

Loss on extinguishment of debt

1

6

Loss of affiliates, net of dividends

4

33

Emissions allowance expense

89

118

Other

51

54

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivable

(62)

(77)

(Increase) decrease in inventory

191

(44)

(Increase) decrease in prepaid expenses and other current assets

64

59

(Increase) decrease in other assets

50

(10)

Increase (decrease) in accounts payable and other current liabilities

(293)

(124)

Increase (decrease) in income tax payables, net and other tax payables

(7)

7

Increase (decrease) in deferred income

21

10

Increase (decrease) in other liabilities

45

(9)

Net cash provided by operating activities

625

457

INVESTING ACTIVITIES:

Capital expenditures

(1,551)

(766)

Proceeds from the sale of business interests, net of cash and restricted cash sold

98

1

Sale of short-term investments

356

197

Purchase of short-term investments

(418)

(345)

Contributions and loans to equity affiliates

(20)

(93)

Purchase of emissions allowances

(78)

(136)

Other investing

(11)

(11)

Net cash used in investing activities

(1,624)

(1,153)

FINANCING ACTIVITIES:

Borrowings under the revolving credit facilities and commercial paper program

2,335

1,193

Repayments under the revolving credit facilities and commercial paper program

(1,625)

(715)

Issuance of recourse debt

500

—

Repayments of recourse debt

—

(29)

Issuance of non-recourse debt

690

1,710

Repayments of non-recourse debt

(660)

(788)

Payments for financing fees

(18)

(27)

Purchases under supplier financing arrangements

529

93

Repayments of obligations under supplier financing arrangements

(587)

(50)

Distributions to noncontrolling interests

(47)

(47)

Acquisitions of noncontrolling interests

—

(535)

Contributions from noncontrolling interests

18

8

Sales to noncontrolling interests

—

48

Issuance of preferred shares in subsidiaries

3

60

Dividends paid on AES common stock

(111)

(105)

Payments for financed capital expenditures

(4)

(4)

Other financing

(7)

6

Net cash provided by financing activities

1,016

818

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(18)

20

Increase in cash, cash equivalents and restricted cash of held-for-sale businesses

(9)

(64)

Total increase (decrease) in cash, cash equivalents and restricted cash

(10)

78

Cash, cash equivalents and restricted cash, beginning

2,087

1,484

Cash, cash equivalents and restricted cash, ending

$         2,077

$         1,562

SUPPLEMENTAL DISCLOSURES:

Cash payments for interest, net of amounts capitalized

$            252

$            185

Cash payments for income taxes, net of refunds

53

46

SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Dividends declared but not yet paid

111

105

Reconciliation of Adjusted EBITDA (in millions)

2023

2022

Net income

$                189

$                171

Income tax expense

72

60

Interest expense

330

258

Interest income

(123)

(75)

Depreciation and amortization

273

270

EBITDA

$                741

$                684

Less: Adjustment for noncontrolling interests and redeemable stock of subsidiaries ⁽¹⁾

(170)

(156)

Less: Income tax expense (benefit), interest expense (income) and depreciation and amortization from equity affiliates

39

34

Interest income recognized under service concession arrangements

18

19

Unrealized derivative and equity securities losses (gains)

(39)

42

Unrealized foreign currency losses (gains)

32

(18)

Disposition/acquisition losses

(3)

9

Impairment losses

9

1

Loss on extinguishment of debt

1

6

Adjusted EBITDA

$                628

$                621

_______________________________

⁽¹⁾

The allocation of earnings to tax equity investors from both consolidated entities and equity affiliates is removed from Adjusted EBITDA.

Adjusted PTC is defined as pre-tax income from continuing operations attributable to The AES Corporation excluding gains or losses of the consolidated entity due to (a) unrealized gains or losses related to derivative transactions and equity securities; (b) unrealized foreign currency gains or losses; (c) gains, losses, benefits and costs associated with dispositions and acquisitions of business interests, including early plant closures, and gains and losses recognized at commencement of sales-type leases; (d) losses due to impairments; (e) gains, losses, and costs due to the early retirement of debt; and (f) net gains at Angamos, one of our businesses in the Energy Infrastructure SBU, associated with the early contract terminations with Minera Escondida and Minera Spence.  Adjusted PTC also includes net equity in earnings of affiliates on an after-tax basis adjusted for the same gains or losses excluded from consolidated entities.

Adjusted EPS is defined as diluted earnings per share from continuing operations excluding gains or losses of both consolidated entities and entities accounted for under the equity method due to (a) unrealized gains or losses related to derivative transactions and equity securities; (b) unrealized foreign currency gains or losses; (c) gains, losses, benefits and costs associated with dispositions and acquisitions of business interests, including early plant closures, and the tax impact from the repatriation of sales proceeds, and gains and losses recognized at commencement of sales-type leases; (d) losses due to impairments; (e) gains, losses and costs due to the early retirement of debt; (f) net gains at Angamos, one of our businesses in the Energy Infrastructure SBU, associated with the early contract terminations with Minera Escondida and Minera Spence; and (g) tax benefit or expense related to the enactment effects of 2017 U.S. tax law reform and related regulations and any subsequent period adjustments related to enactment effects, including the 2021 tax benefit on reversal of uncertain tax positions effectively settled upon the closure of the Company's U.S. tax return exam.

The GAAP measure most comparable to Adjusted PTC is income from continuing operations attributable to AES. The GAAP measure most comparable to Adjusted EPS is diluted earnings per share from continuing operations. We believe that Adjusted PTC and Adjusted EPS better reflect the underlying business performance of the Company and are considered in the Company's internal evaluation of financial performance. Factors in this determination include the variability due to unrealized gains or losses related to derivative transactions or equity securities remeasurement, unrealized foreign currency gains or losses, losses due to impairments, strategic decisions to dispose of or acquire business interests or retire debt, and the non-recurring nature of the impact of the early contract terminations at Angamos, which affect results in a given period or periods. In addition, for Adjusted PTC, earnings before tax represents the business performance of the Company before the application of statutory income tax rates and tax adjustments, including the effects of tax planning, corresponding to the various jurisdictions in which the Company operates. Adjusted PTC and Adjusted EPS should not be construed as alternatives to income from continuing operations attributable to AES and diluted earnings per share from continuing operations, which are determined in accordance with GAAP.

Three Months Ended
March 31, 2023

Three Months Ended
March 31, 2022

Net of NCI ⁽¹⁾

Per Share
(Diluted)
Net of NCI ⁽¹⁾

Net of NCI ⁽¹⁾

Per Share
(Diluted)
Net of NCI ⁽¹⁾

(in millions, except per share amounts)

Income from continuing operations, net of tax, attributable to AES and Diluted EPS

$     151

$     0.21

$      115

$     0.16

Add: Income tax expense from continuing operations attributable to AES

51

50

Pre-tax contribution

$     202

$      165

Adjustments

Unrealized derivative and equity securities losses (gains)

$      (39)

$    (0.06)

(2)

$        41

$     0.06

(3)

Unrealized foreign currency losses (gains)

31

0.04

(4)

(19)

(0.02)

(5)

Disposition/acquisition losses

(3)

—

9

0.01

Impairment losses

9

0.01

1

—

Loss on extinguishment of debt

4

0.01

10

0.01

Less: Net income tax benefit

0.01

(0.01)

Adjusted PTC and Adjusted EPS

$     204

$     0.22

$      207

$     0.21

_____________________________

⁽¹⁾

NCI is defined as Noncontrolling Interests.

⁽²⁾

Amount primarily relates to unrealized derivative losses at Energy Infrastructure SBU of $48 million, or $0.07 per share. 

⁽³⁾

Amount primarily relates to unrealized commodity derivative losses at New York Wind of $20 million, or $0.03 per share, and unrealized foreign currency derivative losses in Brazil of $20 million, or $0.03 per share. 

⁽⁴⁾

Amount primarily relates to unrealized foreign currency losses mainly associated with the devaluation of long-term receivables denominated in Argentine pesos of $25 million, or $0.03 per share.  

⁽⁵⁾

Amount primarily relates to unrealized foreign currency gains in Brazil of $22 million, or $0.03 per share, mainly associated with debt denominated in Brazilian reais.

The AES Corporation

Parent Financial Information

Parent only data: last four quarters

(in millions)

4 Quarters Ended

Total subsidiary distributions & returns of capital to Parent

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Actual

Actual

Actual

Actual

Subsidiary distributions¹ to Parent & QHCs

$             1,489

$             1,298

$             1,022

$            1,231

Returns of capital distributions to Parent & QHCs

56

—

1

1

Total subsidiary distributions & returns of capital to Parent

$             1,545

$             1,298

$             1,023

$            1,232

Parent only data: quarterly

(in millions)

Quarter Ended

Total subsidiary distributions & returns of capital to Parent

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Actual

Actual

Actual

Actual

Subsidiary distributions¹ to Parent & QHCs

$                356

$                753

$                  69

$               311

Returns of capital distributions to Parent & QHCs

56

—

—

—

Total subsidiary distributions & returns of capital to Parent

$                412

$                753

$                  69

$               311

(in millions)

Balance at

March 31,
2023

December 31,
2022

September 30,
2022

June 30,
2022

Parent Company Liquidity²

Actual

Actual

Actual

Actual

Cash at Parent & Cash at QHCs³

$                117

$                  24

$                  49

$                 29

Availability under credit facilities

970

1,141

374

414

Ending liquidity

$             1,087

$             1,165

$                423

$               443

____________________________

⁽¹⁾

Subsidiary distributions received by Qualified Holding Companies ("QHCs") excluded from Schedule 1. Subsidiary Distributions should not be construed as an alternative to Consolidated Net Cash Provided by Operating Activities, which is determined in accordance with US GAAP. Subsidiary Distributions are important to the Parent Company because the Parent Company is a holding company that does not derive any significant direct revenues from its own activities but instead relies on its subsidiaries' business activities and the resultant distributions to fund the debt service, investment and other cash needs of the holding company. The reconciliation of the difference between the Subsidiary Distributions and Consolidated Net Cash Provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons which are both discretionary and non-discretionary in nature. These factors include, but are not limited to, retention of cash to fund capital expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and related debt service requirements at the subsidiaries, retention of cash related to sufficiency of local GAAP statutory retained earnings at the subsidiaries, retention of cash for working capital needs at the subsidiaries, and other similar timing differences between when the cash is generated at the subsidiaries and when it reaches the Parent Company and related holding companies.

⁽²⁾

Parent Company Liquidity is defined as cash available to the Parent Company, including cash at qualified holding companies (QHCs), plus available borrowings under our existing credit facility. AES believes that unconsolidated Parent Company liquidity is important to the liquidity position of AES as a Parent Company because of the non-recourse nature of most of AES' indebtedness.

⁽³⁾

The cash held at QHCs represents cash sent to subsidiaries of the company domiciled outside of the US. Such subsidiaries have no contractual restrictions on their ability to send cash to AES, the Parent Company. 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.