Intrinsic value of AES - AES

Previous Close

$13.94

  Intrinsic Value

$1.89

stock screener

  Rating & Target

str. sell

-86%

Previous close

$13.94

 
Intrinsic value

$1.89

 
Up/down potential

-86%

 
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

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 9.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   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
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.40
  2.66
  2.89
  3.10
  3.29
  3.46
  3.62
  3.76
  3.88
  3.99
  4.09
  4.18
  4.27
  4.34
  4.41
  4.46
  4.52
  4.57
  4.61
  4.65
  4.68
  4.72
  4.74
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
Revenue, $m
  10,783
  11,070
  11,390
  11,744
  12,130
  12,551
  13,005
  13,493
  14,017
  14,577
  15,173
  15,808
  16,482
  17,198
  17,955
  18,757
  19,604
  20,500
  21,445
  22,441
  23,493
  24,600
  25,767
  26,996
  28,290
  29,652
  31,085
  32,592
  34,177
  35,844
Variable operating expenses, $m
  9,723
  9,977
  10,262
  10,576
  10,920
  11,293
  11,697
  12,131
  12,596
  13,093
  13,481
  14,045
  14,644
  15,280
  15,953
  16,665
  17,418
  18,213
  19,053
  19,938
  20,872
  21,857
  22,893
  23,985
  25,135
  26,345
  27,618
  28,957
  30,365
  31,846
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
  9,723
  9,977
  10,262
  10,576
  10,920
  11,293
  11,697
  12,131
  12,596
  13,093
  13,481
  14,045
  14,644
  15,280
  15,953
  16,665
  17,418
  18,213
  19,053
  19,938
  20,872
  21,857
  22,893
  23,985
  25,135
  26,345
  27,618
  28,957
  30,365
  31,846
Operating income, $m
  1,060
  1,092
  1,128
  1,167
  1,210
  1,257
  1,308
  1,362
  1,421
  1,483
  1,692
  1,763
  1,838
  1,918
  2,003
  2,092
  2,187
  2,286
  2,392
  2,503
  2,620
  2,744
  2,874
  3,011
  3,155
  3,307
  3,467
  3,635
  3,812
  3,998
EBITDA, $m
  3,434
  3,525
  3,627
  3,740
  3,863
  3,997
  4,141
  4,297
  4,463
  4,642
  4,832
  5,034
  5,249
  5,476
  5,718
  5,973
  6,243
  6,528
  6,829
  7,146
  7,481
  7,834
  8,205
  8,597
  9,009
  9,442
  9,898
  10,378
  10,883
  11,414
Interest expense (income), $m
  1,273
  1,178
  1,170
  1,218
  1,272
  1,331
  1,395
  1,465
  1,541
  1,623
  1,710
  1,804
  1,903
  2,009
  2,122
  2,241
  2,368
  2,502
  2,643
  2,793
  2,951
  3,117
  3,293
  3,478
  3,672
  3,878
  4,094
  4,321
  4,560
  4,812
  5,077
Earnings before tax, $m
  -118
  -78
  -90
  -104
  -120
  -138
  -158
  -179
  -202
  -227
  -111
  -140
  -171
  -204
  -239
  -276
  -315
  -357
  -401
  -448
  -497
  -549
  -604
  -661
  -722
  -787
  -854
  -925
  -1,000
  -1,079
Tax expense, $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
Net income, $m
  -118
  -78
  -90
  -104
  -120
  -138
  -158
  -179
  -202
  -227
  -111
  -140
  -171
  -204
  -239
  -276
  -315
  -357
  -401
  -448
  -497
  -549
  -604
  -661
  -722
  -787
  -854
  -925
  -1,000
  -1,079

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  33,908
  34,810
  35,817
  36,929
  38,146
  39,467
  40,895
  42,432
  44,078
  45,838
  47,715
  49,711
  51,832
  54,081
  56,463
  58,984
  61,649
  64,464
  67,436
  70,571
  73,876
  77,360
  81,030
  84,894
  88,963
  93,245
  97,751
  102,490
  107,475
  112,718
Adjusted assets (=assets-cash), $m
  33,908
  34,810
  35,817
  36,929
  38,146
  39,467
  40,895
  42,432
  44,078
  45,838
  47,715
  49,711
  51,832
  54,081
  56,463
  58,984
  61,649
  64,464
  67,436
  70,571
  73,876
  77,360
  81,030
  84,894
  88,963
  93,245
  97,751
  102,490
  107,475
  112,718
Revenue / Adjusted assets
  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
  22,309
  22,903
  23,566
  24,297
  25,098
  25,967
  26,907
  27,918
  29,001
  30,159
  31,393
  32,707
  34,102
  35,582
  37,149
  38,808
  40,561
  42,414
  44,369
  46,431
  48,606
  50,898
  53,313
  55,856
  58,532
  61,350
  64,314
  67,433
  70,713
  74,162
Working capital, $m
  -830
  -852
  -877
  -904
  -934
  -966
  -1,001
  -1,039
  -1,079
  -1,122
  -1,168
  -1,217
  -1,269
  -1,324
  -1,383
  -1,444
  -1,510
  -1,578
  -1,651
  -1,728
  -1,809
  -1,894
  -1,984
  -2,079
  -2,178
  -2,283
  -2,394
  -2,510
  -2,632
  -2,760
Total debt, $m
  19,835
  20,647
  21,554
  22,554
  23,649
  24,839
  26,124
  27,506
  28,988
  30,572
  32,261
  34,058
  35,966
  37,991
  40,135
  42,403
  44,802
  47,336
  50,010
  52,831
  55,806
  58,942
  62,245
  65,723
  69,385
  73,239
  77,294
  81,559
  86,046
  90,764
Total liabilities, $m
  30,517
  31,329
  32,236
  33,236
  34,331
  35,521
  36,806
  38,188
  39,670
  41,254
  42,943
  44,740
  46,648
  48,673
  50,817
  53,085
  55,484
  58,018
  60,692
  63,513
  66,488
  69,624
  72,927
  76,405
  80,067
  83,921
  87,976
  92,241
  96,728
  101,446
Total equity, $m
  3,391
  3,481
  3,582
  3,693
  3,815
  3,947
  4,090
  4,243
  4,408
  4,584
  4,771
  4,971
  5,183
  5,408
  5,646
  5,898
  6,165
  6,446
  6,744
  7,057
  7,388
  7,736
  8,103
  8,489
  8,896
  9,325
  9,775
  10,249
  10,748
  11,272
Total liabilities and equity, $m
  33,908
  34,810
  35,818
  36,929
  38,146
  39,468
  40,896
  42,431
  44,078
  45,838
  47,714
  49,711
  51,831
  54,081
  56,463
  58,983
  61,649
  64,464
  67,436
  70,570
  73,876
  77,360
  81,030
  84,894
  88,963
  93,246
  97,751
  102,490
  107,476
  112,718
Debt-to-equity ratio
  5.850
  5.930
  6.020
  6.110
  6.200
  6.290
  6.390
  6.480
  6.580
  6.670
  6.760
  6.850
  6.940
  7.020
  7.110
  7.190
  7.270
  7.340
  7.420
  7.490
  7.550
  7.620
  7.680
  7.740
  7.800
  7.850
  7.910
  7.960
  8.010
  8.050
Adjusted equity ratio
  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
  -118
  -78
  -90
  -104
  -120
  -138
  -158
  -179
  -202
  -227
  -111
  -140
  -171
  -204
  -239
  -276
  -315
  -357
  -401
  -448
  -497
  -549
  -604
  -661
  -722
  -787
  -854
  -925
  -1,000
  -1,079
Depreciation, amort., depletion, $m
  2,373
  2,433
  2,499
  2,572
  2,652
  2,739
  2,833
  2,934
  3,043
  3,158
  3,139
  3,271
  3,410
  3,558
  3,715
  3,881
  4,056
  4,241
  4,437
  4,643
  4,861
  5,090
  5,331
  5,586
  5,853
  6,135
  6,431
  6,743
  7,071
  7,416
Funds from operations, $m
  2,256
  2,355
  2,409
  2,468
  2,532
  2,601
  2,676
  2,755
  2,841
  2,931
  3,028
  3,130
  3,239
  3,354
  3,476
  3,605
  3,741
  3,884
  4,036
  4,195
  4,364
  4,541
  4,728
  4,924
  5,131
  5,348
  5,577
  5,818
  6,071
  6,337
Change in working capital, $m
  -19
  -22
  -25
  -27
  -30
  -32
  -35
  -38
  -40
  -43
  -46
  -49
  -52
  -55
  -58
  -62
  -65
  -69
  -73
  -77
  -81
  -85
  -90
  -95
  -100
  -105
  -110
  -116
  -122
  -128
Cash from operations, $m
  2,275
  2,377
  2,433
  2,495
  2,562
  2,634
  2,711
  2,793
  2,881
  2,974
  3,074
  3,179
  3,291
  3,409
  3,534
  3,667
  3,806
  3,953
  4,109
  4,272
  4,445
  4,626
  4,817
  5,019
  5,231
  5,453
  5,688
  5,934
  6,193
  6,466
Maintenance CAPEX, $m
  -2,179
  -2,231
  -2,290
  -2,357
  -2,430
  -2,510
  -2,597
  -2,691
  -2,792
  -2,900
  -3,016
  -3,139
  -3,271
  -3,410
  -3,558
  -3,715
  -3,881
  -4,056
  -4,241
  -4,437
  -4,643
  -4,861
  -5,090
  -5,331
  -5,586
  -5,853
  -6,135
  -6,431
  -6,743
  -7,071
New CAPEX, $m
  -519
  -593
  -663
  -732
  -800
  -870
  -940
  -1,011
  -1,083
  -1,158
  -1,235
  -1,314
  -1,395
  -1,480
  -1,567
  -1,659
  -1,753
  -1,852
  -1,955
  -2,063
  -2,175
  -2,292
  -2,415
  -2,543
  -2,677
  -2,817
  -2,964
  -3,118
  -3,280
  -3,449
Cash from investing activities, $m
  -2,698
  -2,824
  -2,953
  -3,089
  -3,230
  -3,380
  -3,537
  -3,702
  -3,875
  -4,058
  -4,251
  -4,453
  -4,666
  -4,890
  -5,125
  -5,374
  -5,634
  -5,908
  -6,196
  -6,500
  -6,818
  -7,153
  -7,505
  -7,874
  -8,263
  -8,670
  -9,099
  -9,549
  -10,023
  -10,520
Free cash flow, $m
  -423
  -448
  -520
  -593
  -668
  -746
  -826
  -908
  -994
  -1,084
  -1,177
  -1,274
  -1,375
  -1,481
  -1,591
  -1,707
  -1,828
  -1,955
  -2,088
  -2,227
  -2,373
  -2,526
  -2,687
  -2,855
  -3,032
  -3,217
  -3,412
  -3,616
  -3,830
  -4,055
Issuance/(repayment) of debt, $m
  -130
  812
  907
  1,001
  1,095
  1,189
  1,285
  1,383
  1,482
  1,584
  1,689
  1,797
  1,908
  2,024
  2,144
  2,269
  2,399
  2,534
  2,674
  2,821
  2,975
  3,135
  3,303
  3,478
  3,662
  3,854
  4,055
  4,266
  4,487
  4,718
Issuance/(repurchase) of shares, $m
  1,044
  168
  191
  216
  242
  270
  300
  332
  367
  403
  299
  340
  383
  429
  477
  528
  582
  638
  698
  761
  827
  897
  971
  1,048
  1,129
  1,215
  1,305
  1,399
  1,499
  1,603
Cash from financing (excl. dividends), $m  
  914
  980
  1,098
  1,217
  1,337
  1,459
  1,585
  1,715
  1,849
  1,987
  1,988
  2,137
  2,291
  2,453
  2,621
  2,797
  2,981
  3,172
  3,372
  3,582
  3,802
  4,032
  4,274
  4,526
  4,791
  5,069
  5,360
  5,665
  5,986
  6,321
Total cash flow (excl. dividends), $m
  490
  532
  578
  623
  668
  714
  760
  807
  854
  903
  811
  863
  917
  972
  1,030
  1,090
  1,152
  1,217
  1,285
  1,355
  1,429
  1,506
  1,587
  1,671
  1,759
  1,851
  1,948
  2,049
  2,155
  2,266
Retained Cash Flow (-), $m
  -1,044
  -168
  -191
  -216
  -242
  -270
  -300
  -332
  -367
  -403
  -299
  -340
  -383
  -429
  -477
  -528
  -582
  -638
  -698
  -761
  -827
  -897
  -971
  -1,048
  -1,129
  -1,215
  -1,305
  -1,399
  -1,499
  -1,603
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
  -553
  364
  387
  408
  427
  444
  460
  474
  488
  500
  512
  523
  534
  544
  553
  562
  570
  579
  587
  594
  602
  609
  616
  623
  630
  637
  643
  650
  657
  663
Discount rate, %
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.84
  17.69
  18.57
  19.50
  20.47
  21.50
  22.57
  23.70
  24.88
  26.13
  27.44
  28.81
  30.25
  31.76
  33.35
  35.02
  36.77
  38.60
  40.53
  42.56
  44.69
  46.92
PV of cash for distribution, $m
  -497
  290
  271
  248
  223
  196
  170
  144
  120
  98
  79
  62
  47
  36
  26
  19
  13
  9
  6
  4
  2
  1
  1
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  89.8
  88.6
  87.3
  86.0
  84.5
  82.9
  81.3
  79.5
  77.7
  75.9
  74.6
  73.2
  71.7
  70.1
  68.5
  66.8
  65.1
  63.4
  61.6
  59.8
  57.9
  56.1
  54.3
  52.5
  50.7
  48.9
  47.1
  45.4
  43.7
  42.0

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 -8.1
Price to Sales 0.7
Price to Book 3.3
Price to Tangible Book
Price to Cash Flow 3.2
Price to Free Cash Flow 16.7
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 2017 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 2.4% 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 11.4%, 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 206.9%.

Life of production assets of 10 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 -7.7%. 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 660 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 $9.2 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]

RELATED COMPANIES Price Int.Val. Rating
EIX Edison Interna 69.88 21.49  str.sell
HE Hawaiian Elect 35.76 10.33  str.sell
ENIA Enel Americas 7.93 0.39  str.sell
ORA Ormat Technolo 51.30 12.82  str.sell
SPWR SunPower 6.64 0.21  str.sell
OGE OGE Energy 37.56 4.81  str.sell
SO Southern 46.97 15.71  str.sell

COMPANY NEWS

▶ 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]
▶ AES: 1Q Earnings Snapshot   [07:33AM  Associated Press]
▶ 3 Top Dividend Stocks With Yields Over 3%   [Apr-26-18 06:34AM  Motley Fool]
▶ Beat Benchmark Treasury Yield With 5 Top Stocks   [Apr-25-18 07:11AM  Zacks]
▶ AES Announces Quarterly Dividend   [Apr-13-18 08:00AM  Business Wire]
▶ Why Mallinckrodt, Tenet Healthcare, and AES Jumped Today   [Feb-27-18 04:31PM  Motley Fool]
▶ AES Corporation to Host Earnings Call   [07:15AM  ACCESSWIRE]
▶ AES reports 4Q loss   [06:47AM  Associated Press]
▶ Here are the D.C.-area stocks getting pummeled in the market rout   [Feb-06-18 03:21PM  American City Business Journals]
▶ AES Announces Next Steps in Its Strategic Transformation   [Feb-05-18 08:30AM  Business Wire]
Follow us on:   twitter   twitter   twitter   twitter

ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2018. All rigths reserved.