Intrinsic value of AES - AES

Previous Close

$15.53

  Intrinsic Value

$1.18

stock screener

  Rating & Target

str. sell

-92%

Previous close

$15.53

 
Intrinsic value

$1.18

 
Up/down potential

-92%

 
Rating

str. sell

We calculate the intrinsic value of AES stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.02
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  13,586
  10,741
  10,988
  11,270
  11,587
  11,938
  12,324
  12,743
  13,198
  13,687
  14,213
  14,774
  15,374
  16,013
  16,691
  17,411
  18,174
  18,982
  19,836
  20,738
  21,691
  22,697
  23,757
  24,875
  26,052
  27,293
  28,598
  29,973
  31,419
  32,941
  34,541
Variable operating expenses, $m
 
  9,685
  9,905
  10,156
  10,437
  10,749
  11,092
  11,465
  11,868
  12,303
  12,770
  13,127
  13,659
  14,227
  14,829
  15,469
  16,147
  16,865
  17,624
  18,425
  19,272
  20,165
  21,107
  22,100
  23,147
  24,249
  25,409
  26,630
  27,915
  29,267
  30,689
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  13,447
  9,685
  9,905
  10,156
  10,437
  10,749
  11,092
  11,465
  11,868
  12,303
  12,770
  13,127
  13,659
  14,227
  14,829
  15,469
  16,147
  16,865
  17,624
  18,425
  19,272
  20,165
  21,107
  22,100
  23,147
  24,249
  25,409
  26,630
  27,915
  29,267
  30,689
Operating income, $m
  139
  1,055
  1,083
  1,114
  1,150
  1,189
  1,232
  1,279
  1,329
  1,384
  1,443
  1,648
  1,715
  1,786
  1,862
  1,942
  2,027
  2,117
  2,212
  2,313
  2,419
  2,531
  2,650
  2,774
  2,906
  3,044
  3,190
  3,343
  3,504
  3,674
  3,852
EBITDA, $m
  1,315
  2,353
  2,408
  2,469
  2,539
  2,616
  2,700
  2,792
  2,892
  2,999
  3,114
  3,237
  3,369
  3,509
  3,657
  3,815
  3,982
  4,159
  4,346
  4,544
  4,753
  4,973
  5,205
  5,450
  5,708
  5,980
  6,266
  6,567
  6,884
  7,218
  7,568
Interest expense (income), $m
  1,273
  1,178
  1,163
  1,204
  1,252
  1,305
  1,363
  1,428
  1,498
  1,574
  1,655
  1,743
  1,837
  1,937
  2,044
  2,157
  2,277
  2,404
  2,539
  2,682
  2,833
  2,992
  3,160
  3,337
  3,523
  3,720
  3,927
  4,145
  4,375
  4,616
  4,870
Earnings before tax, $m
  137
  -123
  -80
  -90
  -102
  -116
  -131
  -149
  -168
  -189
  -213
  -95
  -122
  -151
  -182
  -215
  -250
  -287
  -327
  -369
  -413
  -460
  -510
  -562
  -618
  -676
  -737
  -802
  -870
  -942
  -1,018
Tax expense, $m
  -188
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -1,141
  -123
  -80
  -90
  -102
  -116
  -131
  -149
  -168
  -189
  -213
  -95
  -122
  -151
  -182
  -215
  -250
  -287
  -327
  -369
  -413
  -460
  -510
  -562
  -618
  -676
  -737
  -802
  -870
  -942
  -1,018

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  2,103
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  36,119
  33,775
  34,552
  35,440
  36,437
  37,542
  38,754
  40,074
  41,502
  43,042
  44,693
  46,461
  48,346
  50,354
  52,488
  54,752
  57,151
  59,691
  62,377
  65,215
  68,211
  71,373
  74,708
  78,222
  81,925
  85,826
  89,932
  94,254
  98,803
  103,588
  108,621
Adjusted assets (=assets-cash), $m
  34,016
  33,775
  34,552
  35,440
  36,437
  37,542
  38,754
  40,074
  41,502
  43,042
  44,693
  46,461
  48,346
  50,354
  52,488
  54,752
  57,151
  59,691
  62,377
  65,215
  68,211
  71,373
  74,708
  78,222
  81,925
  85,826
  89,932
  94,254
  98,803
  103,588
  108,621
Revenue / Adjusted assets
  0.399
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
  0.318
Average production assets, $m
  24,278
  21,492
  21,986
  22,551
  23,186
  23,889
  24,660
  25,500
  26,409
  27,388
  28,439
  29,564
  30,764
  32,041
  33,399
  34,840
  36,366
  37,982
  39,692
  41,497
  43,404
  45,416
  47,538
  49,774
  52,131
  54,612
  57,225
  59,976
  62,870
  65,915
  69,117
Working capital, $m
  1,139
  902
  923
  947
  973
  1,003
  1,035
  1,070
  1,109
  1,150
  1,194
  1,241
  1,291
  1,345
  1,402
  1,463
  1,527
  1,594
  1,666
  1,742
  1,822
  1,907
  1,996
  2,089
  2,188
  2,293
  2,402
  2,518
  2,639
  2,767
  2,901
Total debt, $m
  20,463
  19,716
  20,415
  21,214
  22,112
  23,106
  24,197
  25,384
  26,670
  28,055
  29,542
  31,133
  32,830
  34,637
  36,557
  38,595
  40,754
  43,040
  45,457
  48,011
  50,708
  53,554
  56,555
  59,718
  63,051
  66,561
  70,257
  74,147
  78,240
  82,547
  87,077
Total liabilities, $m
  33,325
  30,398
  31,097
  31,896
  32,794
  33,788
  34,879
  36,066
  37,352
  38,737
  40,224
  41,815
  43,512
  45,319
  47,239
  49,277
  51,436
  53,722
  56,139
  58,693
  61,390
  64,236
  67,237
  70,400
  73,733
  77,243
  80,939
  84,829
  88,922
  93,229
  97,759
Total equity, $m
  2,794
  3,378
  3,455
  3,544
  3,644
  3,754
  3,875
  4,007
  4,150
  4,304
  4,469
  4,646
  4,835
  5,035
  5,249
  5,475
  5,715
  5,969
  6,238
  6,521
  6,821
  7,137
  7,471
  7,822
  8,193
  8,583
  8,993
  9,425
  9,880
  10,359
  10,862
Total liabilities and equity, $m
  36,119
  33,776
  34,552
  35,440
  36,438
  37,542
  38,754
  40,073
  41,502
  43,041
  44,693
  46,461
  48,347
  50,354
  52,488
  54,752
  57,151
  59,691
  62,377
  65,214
  68,211
  71,373
  74,708
  78,222
  81,926
  85,826
  89,932
  94,254
  98,802
  103,588
  108,621
Debt-to-equity ratio
  7.324
  5.840
  5.910
  5.990
  6.070
  6.150
  6.240
  6.330
  6.430
  6.520
  6.610
  6.700
  6.790
  6.880
  6.960
  7.050
  7.130
  7.210
  7.290
  7.360
  7.430
  7.500
  7.570
  7.630
  7.700
  7.760
  7.810
  7.870
  7.920
  7.970
  8.020
Adjusted equity ratio
  0.020
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -1,141
  -123
  -80
  -90
  -102
  -116
  -131
  -149
  -168
  -189
  -213
  -95
  -122
  -151
  -182
  -215
  -250
  -287
  -327
  -369
  -413
  -460
  -510
  -562
  -618
  -676
  -737
  -802
  -870
  -942
  -1,018
Depreciation, amort., depletion, $m
  1,176
  1,298
  1,325
  1,355
  1,389
  1,427
  1,468
  1,513
  1,562
  1,615
  1,671
  1,589
  1,654
  1,723
  1,796
  1,873
  1,955
  2,042
  2,134
  2,231
  2,334
  2,442
  2,556
  2,676
  2,803
  2,936
  3,077
  3,225
  3,380
  3,544
  3,716
Funds from operations, $m
  3,446
  1,175
  1,244
  1,265
  1,287
  1,311
  1,337
  1,365
  1,394
  1,426
  1,459
  1,494
  1,532
  1,572
  1,614
  1,658
  1,705
  1,755
  1,807
  1,862
  1,920
  1,981
  2,046
  2,114
  2,185
  2,260
  2,339
  2,422
  2,510
  2,602
  2,698
Change in working capital, $m
  552
  18
  21
  24
  27
  30
  32
  35
  38
  41
  44
  47
  50
  54
  57
  60
  64
  68
  72
  76
  80
  84
  89
  94
  99
  104
  110
  115
  121
  128
  134
Cash from operations, $m
  2,894
  1,158
  1,224
  1,241
  1,261
  1,282
  1,305
  1,329
  1,356
  1,384
  1,415
  1,447
  1,481
  1,518
  1,557
  1,598
  1,641
  1,687
  1,735
  1,786
  1,840
  1,897
  1,957
  2,020
  2,086
  2,156
  2,229
  2,307
  2,388
  2,474
  2,564
Maintenance CAPEX, $m
  0
  -1,133
  -1,155
  -1,182
  -1,212
  -1,247
  -1,284
  -1,326
  -1,371
  -1,420
  -1,472
  -1,529
  -1,589
  -1,654
  -1,723
  -1,796
  -1,873
  -1,955
  -2,042
  -2,134
  -2,231
  -2,334
  -2,442
  -2,556
  -2,676
  -2,803
  -2,936
  -3,077
  -3,225
  -3,380
  -3,544
New CAPEX, $m
  -2,345
  -419
  -494
  -565
  -634
  -703
  -771
  -840
  -909
  -979
  -1,051
  -1,124
  -1,200
  -1,278
  -1,358
  -1,441
  -1,527
  -1,616
  -1,709
  -1,806
  -1,907
  -2,012
  -2,122
  -2,236
  -2,356
  -2,482
  -2,613
  -2,750
  -2,894
  -3,045
  -3,203
Cash from investing activities, $m
  -2,108
  -1,552
  -1,649
  -1,747
  -1,846
  -1,950
  -2,055
  -2,166
  -2,280
  -2,399
  -2,523
  -2,653
  -2,789
  -2,932
  -3,081
  -3,237
  -3,400
  -3,571
  -3,751
  -3,940
  -4,138
  -4,346
  -4,564
  -4,792
  -5,032
  -5,285
  -5,549
  -5,827
  -6,119
  -6,425
  -6,747
Free cash flow, $m
  786
  -394
  -426
  -506
  -586
  -668
  -751
  -836
  -924
  -1,015
  -1,109
  -1,206
  -1,308
  -1,413
  -1,524
  -1,639
  -1,759
  -1,885
  -2,016
  -2,154
  -2,298
  -2,449
  -2,607
  -2,772
  -2,946
  -3,129
  -3,320
  -3,520
  -3,730
  -3,951
  -4,183
Issuance/(repayment) of debt, $m
  36
  -249
  699
  799
  897
  994
  1,091
  1,188
  1,286
  1,385
  1,487
  1,590
  1,697
  1,807
  1,920
  2,038
  2,159
  2,286
  2,417
  2,554
  2,697
  2,846
  3,001
  3,163
  3,333
  3,510
  3,696
  3,890
  4,093
  4,307
  4,530
Issuance/(repurchase) of shares, $m
  -79
  1,035
  158
  179
  202
  226
  252
  281
  311
  343
  378
  272
  311
  352
  395
  441
  490
  541
  596
  653
  713
  777
  843
  914
  988
  1,066
  1,148
  1,234
  1,325
  1,421
  1,521
Cash from financing (excl. dividends), $m  
  -457
  786
  857
  978
  1,099
  1,220
  1,343
  1,469
  1,597
  1,728
  1,865
  1,862
  2,008
  2,159
  2,315
  2,479
  2,649
  2,827
  3,013
  3,207
  3,410
  3,623
  3,844
  4,077
  4,321
  4,576
  4,844
  5,124
  5,418
  5,728
  6,051
Total cash flow (excl. dividends), $m
  338
  392
  431
  472
  513
  553
  592
  632
  673
  714
  756
  656
  700
  745
  792
  840
  891
  943
  997
  1,053
  1,112
  1,174
  1,238
  1,305
  1,375
  1,448
  1,524
  1,604
  1,688
  1,776
  1,868
Retained Cash Flow (-), $m
  355
  -1,035
  -158
  -179
  -202
  -226
  -252
  -281
  -311
  -343
  -378
  -272
  -311
  -352
  -395
  -441
  -490
  -541
  -596
  -653
  -713
  -777
  -843
  -914
  -988
  -1,066
  -1,148
  -1,234
  -1,325
  -1,421
  -1,521
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -643
  273
  293
  311
  326
  340
  352
  362
  370
  378
  384
  389
  393
  397
  399
  401
  401
  401
  401
  399
  397
  394
  391
  387
  382
  376
  370
  363
  355
  347
Discount rate, %
 
  11.50
  12.08
  12.68
  13.31
  13.98
  14.68
  15.41
  16.18
  16.99
  17.84
  18.73
  19.67
  20.65
  21.68
  22.77
  23.91
  25.10
  26.36
  27.68
  29.06
  30.51
  32.04
  33.64
  35.32
  37.09
  38.94
  40.89
  42.93
  45.08
  47.34
PV of cash for distribution, $m
 
  -577
  217
  205
  189
  170
  149
  129
  109
  90
  73
  58
  45
  34
  25
  18
  13
  9
  6
  4
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  90.8
  89.8
  88.7
  87.5
  86.3
  84.9
  83.4
  81.9
  80.3
  78.7
  77.5
  76.3
  75.0
  73.6
  72.2
  70.6
  69.1
  67.5
  65.8
  64.1
  62.4
  60.7
  59.0
  57.2
  55.5
  53.8
  52.1
  50.4
  48.7
  47.0

The AES Corporation is a holding company. The Company, through its subsidiaries and affiliates, operates a diversified portfolio of electricity generation and distribution businesses. It is organized into six strategic business units (SBUs): the United States; Andes; Brazil; Mexico, Central America and the Caribbean (MCAC); Europe, and Asia. As of December 31, 2016, its United States SBU had 18 generation facilities and two integrated utilities in the United States. As of December 31, 2016, its Andes SBU had generation facilities in three countries. Its Brazil SBU has generation and distribution businesses, Eletropaulo and Tiete. As of December 31, 2016, its MCAC SBU had a portfolio of distribution businesses and generation facilities, including renewable energy, in five countries. As of December 31, 2016, its Europe SBU had generation facilities in five countries. As of December 31, 2016, its Asia SBU had generation facilities in three countries.

FINANCIAL RATIOS  of  AES (AES)

Valuation Ratios
P/E Ratio -9
Price to Sales 0.8
Price to Book 3.7
Price to Tangible Book
Price to Cash Flow 3.5
Price to Free Cash Flow 18.6
Growth Rates
Sales Growth Rate -4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 1.6%
Cap. Spend. - 3 Yr. Gr. Rate 3.4%
Financial Strength
Quick Ratio 2
Current Ratio 0.3
LT Debt to Equity 685.8%
Total Debt to Equity 732.4%
Interest Coverage 1
Management Effectiveness
Return On Assets 5.2%
Ret/ On Assets - 3 Yr. Avg. 4.1%
Return On Total Capital -4.9%
Ret/ On T. Cap. - 3 Yr. Avg. -0.2%
Return On Equity -38.4%
Return On Equity - 3 Yr. Avg. -4.1%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 17.9%
Gross Margin - 3 Yr. Avg. 18.9%
EBITDA Margin 19%
EBITDA Margin - 3 Yr. Avg. 23.1%
Operating Margin 1%
Oper. Margin - 3 Yr. Avg. 6.3%
Pre-Tax Margin 1%
Pre-Tax Margin - 3 Yr. Avg. 6%
Net Profit Margin -8.4%
Net Profit Margin - 3 Yr. Avg. -0.5%
Effective Tax Rate -137.2%
Eff/ Tax Rate - 3 Yr. Avg. -23.5%
Payout Ratio -25.4%

AES stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AES stock intrinsic value calculation we used $10530 million for the last fiscal year's total revenue generated by AES. The default revenue input number comes from 2016 income statement of AES. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AES stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 11.5%, whose default value for AES is calculated based on our internal credit rating of AES, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of AES.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AES stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AES stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.9% for AES.

Corporate tax rate of 27% is the nominal tax rate for AES. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AES stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AES are equal to 200.1%.

Life of production assets of 18.6 years is the average useful life of capital assets used in AES operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AES is equal to 8.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $2465 million for AES - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 661.683 million for AES is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of AES at the current share price and the inputted number of shares is $10.3 billion.

Management's discussion and analysis

Consolidated Net Cash Provided by Operating Activities for the year ended December 31, 2016 was $2,884 million, an increase of $750 million compared to the year ended December 31, 2015. The increase was primarily driven by higher collections at the Company’s distribution business in Brazil, Eletropaulo and Sul, and the settlement of overdue receivables at Maritza in Bulgaria. These positive contributions were offset by lower margins across the SBUs (primarily due to lower wholesale prices and lower contributions from regulated customers in the U.S., lower contracted rates in Tietê, the prior year liability reversal in Eletropaulo and unfavorable FX in Kazakhstan), as well as the recovery of overdue receivables in the Dominican Republic in 2015, which benefited 2015 results. Proportional Free Cash Flow (a non-GAAP financial measure) for the year ended December 31, 2016 increased $176 million to $1,417 million compared to the year ended December 31, 2015, primarily due to the same factors as Consolidated Net Cash Provided by Operating Activities.

Overview of 2016 Results

Earnings Per Share and Proportional Free Cash Flow Results in 2016 (in millions, except per share amounts)

 
                       

Years Ended December 31,

2016

 

2015

 

2014

Diluted earnings per share from continuing operations

$

   

$

0.48

   

$

0.97

 

Adjusted earnings per share (a non-GAAP measure) (1)

0.98

   

1.25

   

1.18

 

Net cash provided by operating activities

2,884

   

2,134

   

1,791

 

Proportional Free Cash Flow (a non-GAAP measure) (1) (2)

1,417

   

1,241

   

891

 

_____________________________

   

(1)

See reconciliation and definition under SBU Performance Analysis—Non-GAAP Measures.

   

(2) 

Disclosure of Proportional Free Cash Flow will be discontinued beginning in the first quarter of 2017. See further discussion under SBU Performance Analysis—Non-GAAP Measures.

Diluted earnings per share from continuing operations decreased primarily due to higher impairment expense on long lived assets, lower gains on foreign currency derivatives, lower operating margins at our US, Brazil and Europe SBUs, and lower equity in earnings of affiliates due to the gain earned in 2015 from the restructuring of Guacolda; partially offset by a lower effective tax rate, the absence of goodwill impairment expense in the current year, lower losses on extinguishment of debt and lower share count.

Adjusted EPS, a non-GAAP measure, decreased by 22% to $0.98 primarily driven by lower operating margins at our US, Brazil, and Europe SBUs, lower equity in earnings of affiliates due to the gain earned in 2015 from the restructuring of Guacolda; partially offset by a lower adjusted effective tax rate and lower share count.

Net cash provided by operating activities increased by 35% to $2.9 billion primarily driven by an increase in collections at our Brazil utilities, the collection of overdue receivables at Maritza, and lower costs associated with the fulfillment of our service concession arrangement and lower working capital requirements at Mong Duong. These positive impacts were partially offset by the timing of payments at our Brazil utilities for higher energy purchases made in the prior year, collections of overdue receivables in the prior year in the Dominican Republic, and lower net income adjusted for non-cash items.

Proportional free cash flow, a non-GAAP measure, increased by 14% to $1.4 billion primarily driven by an increase in collections at our Brazil utilities, the collection of overdue receivables at Maritza, and lower working capital requirements at Mong Duong. These positive impacts were partially offset by the timing of payments at our Brazil utilities for higher energy purchases made in the prior year, collections of overdue receivables in the prior year in the Dominican Republic, and a decrease in Adjusted Operating Margin (a non-GAAP measure).

Year Ended December 31, 2016

Consolidated Revenue — Revenue decreased in 2016 compared to 2015 primarily due to:

   

Unfavorable FX impacts of $511 million, primarily in Brazil of $213 million, Argentina of $94 million, Kazakhstan of $63 million and Colombia of $54 million.

   

Brazil due to lower rates for energy sold in Brazil under new contracts at Tietê; operations in 2015 but not in 2016 at Uruguiana; the reversal of a contingent regulatory liability in 2015, and lower demand, partially offset by the annual tariff adjustment at Eletropaulo.

   

Lower pass-through costs at El Salvador and IPP4 in Jordan, the sale of DPLER in January 2016, and lower rates at DPL.

These decreases were partially offset by:

   

The full operations at Mong Duong in 2016 compared to Unit 1 in March 2015 with principal operations commencing in April 2015

   

The commencement of operations at Cochrane in Chile with Unit 1 operational in July 2016 and principal operations in October).

   

Higher environmental returns and new rate case at IPL.

Consolidated Operating Margin — Operating margin decreased in 2016 compared to 2015 primarily due to:

   

Unfavorable FX impacts of $80 million, primarily in Kazakhstan, Argentina, and Colombia.

   

Brazil driven by the revenue drivers above as well as higher fixed costs at Eletropaulo.

These decreases were partially offset by:

   

Higher margin at Gener, impact from full operations at Mong Duong in Vietnam and Cochrane in Chile, and higher margins at IPL as discussed above.

Year Ended December 31, 2015

Consolidated Revenue — Revenue decreased in 2015 compared to 2014 primarily due to:

   

Unfavorable FX impacts of $2.2 billion, mainly in Brazil of $1.8 billion, Colombia of $179 million, and Bulgaria of $74 million.

   

US Utilities due to lower volumes primarily at DPL and outages, milder weather, and lower demand at IPL.

   

Lower prices in the Dominican Republic and El Salvador (primarily resulting from lower pass-through costs).

These decreases were partially offset by:

   

Brazil due to higher tariffs at Eletropaulo (including higher pass-through costs) and the reversal of a contingent regulatory liability at Eletropaulo.

   

Higher capacity prices at DPL.

   

Commencement of principal operations at Mong Duong in April 2015.

Consolidated Operating Margin — Operating margin decreased in 2015 compared to 2014 primarily due to:

   

Unfavorable FX impacts of $362 million, primarily in Brazil of $228 million and Colombia of $83 million.

   

Brazil due to lower demand, lower hydrology, and higher fixed costs.

   

The Dominican Republic due to lower prices and lower availability.

These decreases were partially offset by:

   

Higher tariffs in Brazil as discussed above and lower spot prices on energy purchases at Tietê.

   

Higher generation and lower energy purchases driven by improved hydrological conditions in Panama.

   

Higher prices at Chivor driven by a strong El Niño.

   

Higher availability at Gener and Masinloc.

[Source: Form 10-K dated 2017-02-27]

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COMPANY NEWS

▶ AES: 3Q Earnings Snapshot   [06:13AM  Associated Press]
▶ Dayton Power & Light CEO says company has clear vision ahead   [05:00AM  American City Business Journals]
▶ AES Announces Quarterly Dividend   [Oct-12-18 08:07AM  Business Wire]
▶ sPower Acquires 55 MWdc Idaho Solar 1 Project   [Sep-24-18 08:00AM  Business Wire]
▶ sPower Closes $498.7 Million Bond Deal   [Sep-20-18 12:00PM  Business Wire]
▶ Mexico Aims To Become The Energy Hub Of Latin America   [Sep-19-18 06:00PM  Oilprice.com]
▶ 5 things you need to know about Fluence, Arlington's latest corporate tenant   [Sep-12-18 05:00AM  American City Business Journals]
▶ AES Corp CEO on renewable energy and storage   [Aug-29-18 06:33AM  CNBC Videos]
▶ 7 Utility Stocks Going Crazy   [09:12AM  InvestorPlace]
▶ AES Corporation to Host Earnings Call   [07:00AM  ACCESSWIRE]
▶ AES: 2Q Earnings Snapshot   [06:10AM  Associated Press]
▶ AES Announces Quarterly Dividend   [08:05AM  Business Wire]
▶ AES Corporation Stock Downgraded: What You Need to Know   [Jul-02-18 11:41AM  Motley Fool]
▶ What is Behind The AES Corporations (NYSE:AES) Superior ROE?   [Jun-21-18 12:33PM  Simply Wall St.]
▶ AES Completes Sale of Eletropaulo   [Jun-14-18 08:45AM  Business Wire]
▶ [$$] How Batteries Will Change the Power Business   [Jun-09-18 12:01AM  Barrons.com]
▶ 3 Stocks That Pay You   [08:19AM  Motley Fool]
▶ SRP to launch new battery storage system in Chandler   [May-31-18 04:10PM  American City Business Journals]
▶ Jim Cramer Weighs In On T-Mobile, Skechers And More   [May-09-18 07:16AM  Benzinga]
Financial statements of AES
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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