Exhibit 99.1
The Global Power Company | NEWS RELEASE |
Media Contact: Robin Pence 703-682-6552
Investor Contact: Scott Cunningham 703-682-6336
AES REPORTS STRONG FIRST QUARTER RESULTS; INCREASES GUIDANCE
ARLINGTON, VA., May 8, 2006 — The AES Corporation (NYSE:AES) today reported significant growth in revenues and earnings for the first quarter of 2006. Revenues increased 13% to $3.0 billion from $2.7 billion and net income more than doubled to $351 million compared to $124 million in the first quarter of 2005. Diluted earnings per share of $0.52 increased 174% from $0.19 in the first quarter of 2005. Adjusted earnings per share (a non-GAAP financial measure) were $0.42 versus $0.18 in the first quarter of 2005. See the attached Reconciliation of Adjusted Earnings Per Share for further information.
The Company increased its 2006 guidance for diluted earnings per share from continuing operations to $0.96 from $0.90 and increased its guidance for adjusted earnings per share to $0.97 from $0.95. The Company reaffirmed the other elements of its previously issued 2006 financial guidance and longer-term financial guidance through 2008. The distinction between the diluted earnings per share from continuing operations and adjusted earnings per share guidance excludes the expected net effects from derivatives mark-to-market accounting, corporate debt repayment, portfolio management transactions, and gains or losses from certain foreign currency transactions. AES believes that adjusted earnings per share better reflects the underlying business performance of the Company, and is used in the Company’s internal evaluation of financial performance.
“This was a very good quarter and we increased our guidance for the full year accordingly,” said Paul Hanrahan, AES President and Chief Executive Officer. "Our results for the quarter benefited from our increased efforts in portfolio management, debt restructuring, and accelerating the sale of excess air emission allowances to capitalize on attractive market prices. We also saw some favorable business mix effects related to our tax rate in the quarter."
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The table below summarizes key financial measures for the first quarter of 2006 and 2005.
($ in millions, except per share data) | | First Quarter | | First Quarter | | % | |
| | 2006 | | 2005 | | Change | |
| | | | | | | |
Revenues | | $ | 3,013 | | $ | 2,663 | | 13% | |
| | | | | | | |
Gross Margin | | $ | 954 | | $ | 824 | | 16% | |
| | | | | | | |
Income Before Taxes and Minority Interest | | $ | 633 | | $ | 377 | | 68% | |
| | | | | | | |
Net Income | | $ | 351 | | $ | 124 | | 183% | |
| | | | | | | |
Diluted Earnings Per Share from Continuing Operations | | $ | 0.52 | | $ | 0.19 | | 174% | |
| | | | | | | |
Adjusted Earnings Per Share | | $ | 0.42 | | $ | 0.18 | | 133% | |
| | | | | | | |
Net Cash Provided by Operating Activities | | $ | 544 | | $ | 518 | | 5% | |
Consolidated Financial Highlights
· Revenues in the first quarter of 2006 increased 13% to $3.0 billion, with gains in all segments. Excluding estimated foreign currency impacts, revenues increased approximately 7%, reflecting higher prices as well as an increase of $46 million in sales of excess environmental emission allowances in the U.S. and Europe.
· Gross margin increased 16% to $954 million, reflecting favorable foreign exchange rates, pricing and allowance sales. Gross margin as a percent of sales improved to 31.7% from 30.9% in the prior year due primarily to the allowance sales.
· Results included an $87 million pre-tax gain resulting from the Company’s sale of its 50% equity investment in a power generation company in Canada.
· Interest income increased by 29% to $116 million primarily due to the realization of $17 million in interest income in the Dominican Republic, related to the settlement of certain net receivables with the government, and the impact of higher cash and cash equivalents and short-term investments in Brazil.
· Interest expense decreased 7% to $434 million primarily due to reduced debt balances at certain locations and a decrease in interest rates at our subsidiaries in Venezuela (EDC) and Chile (Gener), partially offset by the negative impacts of foreign currency translation of foreign debt balances.
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· Net other expense of $48 million in the quarter included a $40 million loss on corporate debt retirement and a $22 million charge relating to debt extinguishment at our El Salvador subsidiaries, partially offset by a $14 million gain on extinguishment of debt at a discount in Argentina. Net other expense of $15 million in the first quarter of 2005 included a $14 million penalty payment for early retirement of debt in Venezuela.
· Equity in earnings of affiliates of $36 million included a net $16 million gain at AES Barry, an equity investment, related to settlement of a legal claim and partially offsetting derivative-related adjustments.
· The effective income tax rate decreased from 39% in the first quarter of 2005 to 31% in the first quarter of 2006. Excluding the equity investment sale in Canada, which was not taxable, the effective income tax rate would have been 36% in 2006. The first quarter 2006 tax rate was impacted favorably by a decrease in U.S. taxes on distributions from and earnings of certain non-U.S. subsidiaries partially offset by an increase in tax expense on foreign exchange gains at certain of our Brazilian subsidiaries.
· Minority interest declined 18% to $87 million, due primarily to lower after-tax net earnings at our Brazilian subsidiaries related to additional tax expense on foreign currency gains on U.S. dollar denominated debt.
· Net income increased 183% to $351 million compared to $124 million for the first quarter of 2005 last year. This primarily reflected the higher gross margin and the gain on the sale of our Canadian investment.
· Diluted earnings per share increased 174% to $0.52 compared to $0.19 per diluted share in last year’s quarter. Adjusted earnings per share increased 133% to $0.42 compared to $0.18 in the 2005 quarter.
· Net cash from operating activities increased 5% to $544 million compared to $518 million in the first quarter of 2005. The year over year increase was driven by significantly improved earnings offset by higher tax payments in Brazil, higher working capital and the one time settlement of a derivative instrument in 2005, which did not occur in 2006. Free cash flow (a non-GAAP financial measure defined as net cash from operating activities less maintenance capital expenditures) was $369 million, down 6% from $394 million for the same period last year. The decrease reflected higher maintenance capital expenditures of $175 million versus $124 million in the prior year period. The higher maintenance expenditures were primarily the result of higher environmental related spending. Maintenance capital expenditures are defined as property additions less growth capital expenditures.
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Segment Financial Highlights
· Regulated Utilities segment revenues increased 7% to $1,493 million from $1,399 million in the first quarter of 2005. Excluding the estimated impacts of foreign currency translation, revenues decreased approximately 5%, primarily reflecting the recognition of a retroactive prior year tariff increase benefit at Eletropaulo in Brazil in the first quarter of 2005, partially offset by higher prices at IPL in the U.S. Gross margin increased 1% to $370 million due primarily to favorable foreign exchange rates, largely offset by the prior period tariff increase and higher maintenance costs at IPL. Gross margin as a percent of revenues fell to 24.8% from 26.2% due primarily to last year’s retroactive tariff increase at Eletropaulo and higher maintenance costs.
· Contract Generation segment revenues grew 17% to $1,151 million from $985 million in the first quarter of 2005 due largely to higher prices and higher demand in Brazil and the Dominican Republic, higher prices in Chile, Mexico and Puerto Rico, and increased demand in Pakistan. Foreign currency translation effects were not significant in the quarter. Gross margin improved 11% to $434 million from $392 million over the prior year quarter, due largely to higher prices and demand in Brazil, the Dominican Republic and Chile. Gross margin as a percent of revenues declined to 37.7% from 39.8% due primarily to higher outage-related costs.
· Competitive Supply segment revenues grew 32% to $369 million from $279 million in the first quarter of 2005 and approximately 34% excluding the estimated impacts of foreign currency translation. Revenue increases reflected higher prices and $36 million in excess emission allowances in New York, together with higher prices in Argentina, Panama and Kazakhstan. Gross margin increased 131% to $150 million from $65 million in last year’s first quarter, due primarily to the emission allowance sales and higher pricing. Gross margin as a percent of revenues increased to 40.7% from 23.3% due largely to the allowance sales and higher energy margins in New York.
2006 Financial Outlook Scenario
The operating scenario underlying the Company’s updated 2006 financial guidance anticipates the first quarter to be the strongest in the year, reflecting in part the acceleration of sales of emission allowances, compared to sales primarily in the second and fourth quarters of 2005. It also assumes less of a seasonal peak impact in the third quarter than traditionally occurs due to tax-related business mix and other operating environment assumptions. The scenario assumes a number of factors, including effective tax rate, foreign exchange rates, commodity prices, interest rates, tariff increases, new investments, as well as other significant factors which could make actual results vary from the guidance. Further information on AES’s financial guidance is available at www.aes.com.
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Attachments: Condensed Consolidated Statements of Operations, Segment Information, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows, Reconciliation of Adjusted Earnings per Share, and Parent Financial Information.
Conference Call Information: AES will host a conference call today at 10:00 am Eastern Daylight Time (EDT). The call may be accessed via a live webcast which will be available at www.aes.com or by telephone in listen-only mode at 1-877-691-0877. International callers should dial 1-973-582-2852. Please call at least ten minutes before the scheduled start time. You will be requested to provide your name, e-mail address, and affiliation. The AES First Quarter 2006 Financial Review presentation is available at www.aes.com on the home page and also by selecting “Investor Information” and then “Quarterly Financial Results.”
A webcast replay will be accessible via the internet at www.aes.com beginning shortly after the completion of the call. A telephonic replay will be available today at approximately 12:00 noon EDT. Please dial 1-877-519-4471. International callers should dial 1-973-341-3080. The system will ask for a reservation number; please enter 7326548 followed by the pound key (#). The telephonic replay will be available until Monday, May 22, 2006.
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 demand at our distribution companies and operational performance at our contract generation businesses consistent with historical levels, as well as achievements of planned productivity improvements and incremental growth investments at
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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 2005 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.
About AES: AES is one of the world’s largest global power companies, with 2005 revenues of $11.1 billion. With operations in 26 countries on five continents, AES’s generation and distribution facilities have the capacity to serve 100 million people worldwide. Our 14 regulated utilities amass annual sales of over 82,000 GWh and our 127 generation facilities have the capacity to generate over 44,000 megawatts. Our global workforce of 30,000 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.
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