The AES Corporation Second Quarter 2017 Financial Review August 8, - PowerPoint PPT Presentation

The AES Corporation Second Quarter 2017 Financial Review August 8, 2017

Safe Harbor Disclosure Certain statements in the following presentation regarding AES ’ business operations may constitute “ forward-looking statements. ” 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 ’ current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to, accurate projections of future interest rates, commodity prices and foreign currency pricing, continued normal or better levels of operating performance and electricity demand 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 from investments at investment levels and rates of return consistent with prior experience. For additional assumptions see Slide 55 and the Appendix to this presentation. 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 ’ filings with the Securities and Exchange Commission including but not limited to the risks discussed under Item 1A “ Risk Factors ” and Item 7: “Management’s Discussion & Analysis” in AES’ 2016 Annual Report on Form 10-K, as well as our other SEC filings. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Reconciliation to U.S. GAAP Financial Information The following presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, as amended. Schedules are included herein that reconcile the non-GAAP financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. Contains Forward-Looking Statements 2

Q2 2017 Financial Review Call Adjusted EPS 1 of $0.25, an increase of $0.08, largely driven by higher availability and capital l allocation decisions Reaffirming 2017 guidance and expectations through 2020 l Evaluating path forward for Alto Maipo hydro project under construction in Chile l Successfully completed the expansion of our DPP gas-fired plant in the Dominican Republic l Secured $2 billion in non-recourse financing on favorable terms and broke ground on our 1.4 GW l Southland re-powering project in California With the exception of Alto Maipo, our 4.7 GW under construction are progressing well and remain l on track to be completed through 2020 Closed acquisition of sPower, the largest independent solar developer in the United States, to l increase our long-term contracted, U.S. Dollar-denominated, renewable portfolio To take advantage of our leadership position in energy storage, we announced a 50/50 joint venture l with Siemens to create a global energy storage technology and services company On track to achieve our $400 million per year cost reduction and revenue enhancement program l 1. A non-GAAP financial measure. See Appendix for definition. Contains Forward-Looking Statements 3

Alto Maipo in Chile l As disclosed in May, construction difficulties resulted in projected cost overruns of up to 22% ($460 million) of total project cost l Slower than anticipated productivity by construction contractors since last call „ Alto Maipo terminated one of the project’s contractors for performance reasons l In discussion with potential replacement construction contractors and non-recourse lenders „ Alto Maipo looking for modified construction contracts and financial flexibility l AES’ total exposure to the project is approximately $415 million, 87% of which has already been invested l Will be disciplined when it comes to evaluating any incremental investment from AES Gener into Alto Maipo l Do not expect any material impact on our 2017 guidance and expectations through 2020 Contains Forward-Looking Statements 4

DPP in the Dominican Republic 122 MW CCGT Expansion l Recently completed 122 MW expansion of existing DPP plant, for total capacity of 358 MW l One of the lowest cost generators in the Dominican Republic l New capacity contracted under a long-term, U.S. Dollar- denominated PPA l Completed on budget for total capex of $260 million, funded through debt capacity at AES Dominicana Contains Forward-Looking Statements 5

Eagle Valley in Indiana 671 MW CCGT, COD 1 : 1H 2018 l Remain confident that the project will achieve COD 1 in 1H 2018 l EPC contractor, CBI 2 , has created positive momentum by subcontracting some critical work in an effort to achieve substantial completion by year-end 2017 „ Approximately 1,000 workers on- site 1. Commercial Operations Date. Chicago Bridge and Iron Company. 2. Contains Forward-Looking Statements 6

Southland Repowering in California 1,384 MW Gas and Energy Storage, COD 1 : 1H 2020 (Gas) and 1H 2021 (Energy Storage) l Closed $2 billion in long-term, non- recourse financing at 4.5% „ Demonstrates strength of the project, which has 20-year PPAs with Southern California Edison „ Largest non-recourse financing including a battery-based energy storage project l Gas-fired capacity will be constructed by Kiewit „ One of North America’s largest engineering and construction contractors „ Successful track record of completing similar CCGT projects in California 1. Commercial Operations Date. Contains Forward-Looking Statements 7

On Track to Complete Projects Under Construction 4,659 MW Currently Under Construction Coming On-Line Through 2020 1,284 4 4,659 866 3 2,391 2 118 1 YTG 2017 2018 2019 2020 Total Includes: 79 MW sPower (US-CA), 20 MW Dominican Energy Storage (Dominican Republic) and 19 MW Distributed Energy (US). 1. Includes: 1,320 MW OPGC 2 (India), 671 MW Eagle Valley CCGT (US), 380 MW Colón (Panama) and 20 MW Distributed Energy (US). 2. 3. Includes: 531 MW Alto Maipo (Chile) and 335 MW Masinloc 2 (Philippines). Includes: 1,284 MW Southland Re-Powering (US-CA). 4. Contains Forward-Looking Statements 8

Significant Progress Toward Repositioning Our Portfolio Wind and Solar: Acquired 1.8 GW and Potential to Add at Least 1.5 GW Through 2020 3,602 500 834 570 926 525 1,673 400 1,776 1 2017 2018 2019 2020 Total Acquired Signed PPAs Exclusive Negotiations Advanced Development Note: Solar capacity shown in DC and wind capacity shown in AC. Includes: 1,287 MW sPower (solar, US-CA), 386 MW Alto Sertão (wind, Brazil), 75 MW Boa Hora (solar, Brazil) and 28 MW Na Pua Makani (wind, Hawaii). 1. Contains Forward-Looking Statements 9

Joining Forces with Siemens to Create Fluence New Global Energy Storage Technology and Services Company l Worldwide installed base for energy storage projected to grow to 28 GW over next five years „ Well-positioned to take advantage and see it as an upside to our outlook l New 50/50 joint venture unites scale, experience and resources of AES and Siemens, to develop new storage solutions and services, reaching customers in more than 160 countries „ Expected to close in the fourth quarter of this year, following regulatory approvals Contains Forward-Looking Statements 10

Performance Excellence 1 $ in Millions On Track to Achieve $400 Run Rate through 2020 $25 $400 $25 $50 $50 $250 2012-2016 2017 2018 2019 2020 Total Total Estimate Estimate Estimate Estimate 1. Cost reductions reflected in General and Administrative Expense (G&A), as well as Cost of Sales. Some of the previously reported 2012 and 2013 G&A Expense related to administrative costs at our SBUs has been reclassified to Cost of Sales. Contains Forward-Looking Statements 11

Q2 2017 Financial Review l Q2 2017 results „ Adjusted EPS 1 „ Consolidated Free Cash Flow 1 and Adjusted PTC 1 by Strategic Business Unit (SBU) l 2017 Parent capital allocation plan l 2017 Guidance and 2018-2020 expectations 1. A non-GAAP financial measure. See Appendix for definition. Contains Forward-Looking Statements 12

Q2 2017 Adjusted EPS 1 Increased $0.08 $0.01 $0.25 $0.08 ($0.01) l 2016: 29% $0.17 l 2017: 32% l MCAC l Argentina l UK Q2 2016 SBUs/Corp Tax Capital Allocation Q2 2017 1. A non-GAAP financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. Contains Forward-Looking Statements 13

Q2 Financial Results $ in Millions Consolidated FCF 1 Decreased $448; Adjusted PTC 1 Increased $83 Consolidated Adjusted l Margins improved primarily due to FCF 1 PTC 1 higher availability in MCAC and Argentina $600 $554 l Adjusted PTC 1 also reflects lower $500 $137 Parent interest expense $400 l Lower Consolidated FCF 1 also reflects the collection of overdue receivables at $300 $243 Maritza in Bulgaria in 2016, and higher working capital requirements in Brazil $160 $200 $106 $13 $100 $0 Q2 2016 Q2 2017 Q2 2016 Q2 2017 1 FCF Attributable to NCI 1. A non-GAAP financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. Contains Forward-Looking Statements 14