AES Reports Third Quarter 2014 Adjusted Earnings Per Share of $0.37; Lowers 2014 Guidance, Provides 2015 Guidance and Updates Longer-Term Outlook

The AES Corporation (NYSE: AES) today reported Adjusted Earnings Per Share (Adjusted EPS, a non-GAAP financial measure) of $0.37 for third quarter 2014, a decrease of $0.02 from third quarter 2013. Third quarter 2014 Adjusted EPS reflects the increased contributions from four of the Company's Strategic Business Units (SBUs), driven primarily by higher revenues and operating margin, which was offset by poor hydrology at the Company's Brazil SBU and plant outages at Masinloc in the Philippines, part of the Company's Asia SBU, which came back on-line in July. Third quarter 2014 Adjusted EPS also reflects the Company's lower ownership interest in Masinloc, following the sale of a minority interest, which is offset by the positive contributions from the repurchase of 29.7 million shares since September 30, 2013.

Third quarter 2014 Diluted Earnings Per Share from Continuing Operations increased $0.44 to $0.67 from third quarter 2013, primarily driven by $361 million in gains from the sale of a minority interest in Masinloc in the Philippines and the sale of the Company's four operating wind projects in the United Kingdom.

"This year we have worked hard to offset most of the roughly $0.20 per share negative impact from poor hydrology in Latin America, outages at a few of our plants and a higher than expected tax rate," said Andrés Gluski, AES President and Chief Executive Officer. "We are continuing to deploy our cash to create value for our shareholders. Today we have over 7,000 MW, or $9 billion, of new capacity and upgrades under construction, which is a new record for us. At the same time, in 2014, we expect to return up to $480 million to shareholders, through dividends and share buybacks, which is the highest in AES' 33-year history."

"While we're disappointed that macro factors and higher working capital requirements have set us back one year in our near-term earnings and cash flow growth projections, our longer-term outlook has not changed," said Tom O'Flynn, AES Executive Vice President and Chief Financial Officer. "Going forward, we are maintaining our expectation of strong free cash flow growth of 10% to 15% annually through 2018, which we will invest by comparing the returns from growth projects against share repurchases, while also increasing our dividend."

Table 1: Key Financial Results

Discussion of Operating Drivers of Adjusted Pre-Tax Contribution (Adjusted PTC, a non-GAAP financial measure) and Adjusted EPS

The Company manages its portfolio in six market-oriented Strategic Business Units (SBUs): US (United States), Andes (Chile, Colombia and Argentina), Brazil, MCAC (Mexico, Central America and Caribbean), EMEA (Europe, Middle East and Africa), and Asia.

Table 2: Adjusted PTC1 by SBU and Adjusted EPS1

For the three months ended September 30, 2014, Adjusted EPS was $0.37. Third quarter 2014 Adjusted PTC decreased $33 million to $354 million. Key drivers of the decline in Adjusted PTC included:

• US: An overall increase of $24 million, primarily due to higher contributions from an increase in regulatory retail rates at DPL and from the Company's wind businesses.
• Andes: An overall increase of $11 million, driven by higher volume and spot prices as a result of improved hydrology in Colombia.
• Brazil: An overall decrease of $84 million, due to lower water inflows, resulting in lower generation and an increase in energy purchases at higher spot prices at Tietê and higher costs at Sul and Eletropaulo.
• MCAC: An overall increase of $28 million, driven by improved margins in the Dominican Republic, due to lower fuel prices and higher contract rates and government compensation received for spot purchases made as a result of dry hydrological conditions in Panama.
• EMEA: An overall increase of $13 million, primarily driven by higher availability at Maritza in Bulgaria and contributions from IPP4 Jordan, which came on-line during third quarter 2014.
• Asia: An overall decrease of $28 million, primarily driven by lower contributions from Masinloc in the Philippines due to the sale of a minority interest in the business and the second quarter 2014 forced outage that extended into July 2014.
• Corp/Other: An improvement of $3 million, driven by lower interest expense on recourse debt.

For the nine months ended September 30, 2014, Adjusted EPS decreased $0.12, to $0.89, primarily due to a higher effective tax rate of 32%, versus a tax rate of 22% in the nine months ended September 30, 2013.

For the nine months ended September 30, 2014, Adjusted PTC decreased $9 million, to $937 million. Key drivers of Adjusted PTC included:

• US: An overall decrease of $17 million, primarily driven by one-time gains of $53 million related to the termination of the Beaver Valley PPA in 2013 and a $34 million impact at DPL from temporary forced outages and a lack of available gas in first quarter 2014, partially offset by higher operating performance, primarily at the Company's wind, Hawaii and Southland businesses.
• Andes: An overall decrease of $1 million, primarily due to lower interest income in Argentina and planned maintenance at Gener in Chile, offset by higher volume and spot prices as a result of improved hydrology in Colombia.
• Brazil: An overall decrease of $20 million, driven by lower water inflows resulting in lower generation and increased energy purchases at Tietê.
• MCAC: An overall increase of $28 million, due to higher margins and availability in the Dominican Republic, partially offset by higher energy losses and fixed costs, as well as a one-time unfavorable adjustment to revenue, at the Company's utilities in El Salvador.
• EMEA: An overall increase of $33 million, driven primarily by a favorable reversal of a liability in Kazakhstan and higher operating performance at Ebute in Nigeria.
• Asia: An overall decrease of $68 million, primarily due to outages and a one-time retrospective recalculation of November and December 2013 spot prices that occurred in 2014, as well as the sale of a minority interest in Masinloc in the Philippines in July 2014.
• Corp/Other: An improvement of $36 million, driven by lower interest expense on recourse debt and lower general and administrative expenses.

Discussion of Cash Flow

Third quarter 2014 Proportional Free Cash Flow (a non-GAAP financial measure) was $427 million, an increase of $30 million from third quarter 2013. This increase primarily reflects improved working capital at the Company's utilities in the United States and at Sul in Brazil, due to the recovery of higher pass-through energy purchases in the first half of 2014.

Third quarter 2014 Consolidated Net Cash Provided by Operating Activities decreased $92 million to $763 million, primarily driven by lower operating margin at Tietê in Brazil due to poor hydrological conditions and at Eletropaulo in Brazil as a result of customer refunds, as well as lower operating margin at Masinloc in the Philippines, partially offset by the positive contributions from the Company's utilities in the United States and at Sul in Brazil, as discussed above.

For the nine months ended September 30, 2014, Proportional Free Cash Flow decreased $319 million to $604 million, primarily driven by higher working capital requirements at the Company's utilities in Brazil, the Company's generation businesses in the Dominican Republic and Bulgaria, due to an increase in accounts receivable and in Panama, due to poor hydrology and the resulting higher receivables.

For the nine months ended September 30, 2014, Consolidated Net Cash Provided by Operating Activities decreased $824 million to $1.2 billion, primarily driven by higher working capital requirements at the Company's utilities in Brazil, due to higher energy purchases, higher receivables in the Dominican Republic and poor hydrology in Panama.

Table 3: 2014-2015 Guidance and Longer-Term Expectations

• 2014 Guidance
  • The Company is lowering its full year 2014 Adjusted EPS guidance range from $1.30-$1.38, to $1.25-$1.31, reflecting poor hydrology, which the Company now expects to have a negative impact of $0.10, versus its prior expectation of $0.07-$0.10. The revised range also includes the $0.02 negative impact from a higher than expected effective tax rate of 31%-33%, versus its prior expectation of 30%-32%, due to a change in the geographic mix of its earnings contributions.
  • The Company is lowering its Proportional Free Cash Flow guidance range from $1,000-$1,300 million, to $900-$1,000 million, primarily due to higher working capital requirements at the Company's utilities in Brazil, as a result of poor hydrology and the resulting higher receivables, as well as at Maritza in Bulgaria due to delayed payments from its offtaker and at Gener in Chile, as a result of the timing of VAT receivables related to projects under construction.
  • The Company is lowering its Consolidated Net Cash Provided by Operating Activities guidance range from $2,200-$2,800 million, to $1,800-$2,200 million, primarily due to higher working capital requirements at Tietê and Eletropaulo in Brazil, of which the Company owns 24% and 16%, respectively, as well as higher receivables at Maritza in Bulgaria and at Gener in Chile.
  • The Company's revised 2014 guidance reflects currency and commodity forward curves as of October 15, 2014, versus June 30, 2014 in its prior guidance.
• 2015 Guidance
  • The Company is providing 2015 Adjusted EPS guidance of $1.30-$1.40, primarily reflecting the $0.05 negative impact from macroeconomic factors, including foreign currency devaluation and a decline in expected GDP growth and higher interest rates in Brazil.
  • The Company is providing 2015 Proportional Free Cash Flow guidance of $1,000-$1,350 million, reflecting higher contributions from the Company's businesses in Brazil and Panama, due to recovery of working capital and improved hydrology, and from Gener in Chile, as a result of recovery of working capital and improved operations.
  • The Company's 2015 guidance reflects currency and commodity forward curves as of October 15, 2014, versus December 31, 2013 in its prior growth rate expectations.
• 2016-2018 Expectations
  • The Company expects 2016 Adjusted EPS to reflect flat to modest growth off 2015 guidance provided today.
  • The Company's expectations for 2017 and 2018 Adjusted EPS remain unchanged. Accordingly, the Company updated its 2017 and 2018 Adjusted EPS growth rates to 8%-10%, reflecting the lower 2016 base and driven primarily by the expected contributions from the Company's 7,141 MW currently under construction.
  • The Company continues to expect 10%-15% average annual growth in its Proportional Free Cash Flow for 2016-2018, off 2015 guidance provided today.
  • The Company's 2016-2018 growth rate expectations reflect currency and commodity forward curves as of October 15, 2014, versus its prior expectation as of December 31, 2013. These growth rate expectations reflect lower expected GDP growth in Brazil and higher interest rates in Brazil, as well as unfavorable foreign currency impacts, offset by improvements at DPL in the United States, driven by higher dark spreads and revenue in 2017 and 2018.

Additional Highlights

• Since its second quarter 2014 earnings call in August 2014, the Company has announced or closed three asset sale transactions for total proceeds of $382 million.
  • In August, the Company announced the sale of its four operating wind projects in the United Kingdom for $161 million.
  • In September, the Company announced that it entered into a strategic partnership with the Estrella-Linda Group (Estrella-Linda) for its business in the Dominican Republic. Estrella-Linda acquired an 8% minority interest in AES Dominicana for $96 million.
  • In October, the Company announced the sale of 100% of its interest in its assets in Turkey for $125 million. When this transaction closes (expected by first quarter 2015), the Company will have exited Turkey.
  • Since September 2011, the Company has announced or closed $2.4 billion in asset sale proceeds and announced the exit of nine countries.
• Since its second quarter 2014 earnings call in August 2014, the Company has repurchased 9.3 million shares for $134 million.
  • Year-to-date, the Company has repurchased 12.6 million shares for $182 million.
  • The Board of Directors increased the Company's share repurchase authorization to $150 million, which is currently outstanding.
  • Since September 2011, the Company has repurchased 71.7 million shares, or 9% of its shares outstanding, for $892 million.
• The Company currently has 4,741 MW, plus 2,400 MW of environmental upgrades, under construction and on track to come on-line through 2018.
  • In October, the Company closed financing and broke ground on the conversion of the Dominican Power Partners (DPP) plant in the Dominican Republic from simple cycle to combined cycle, which will increase the plant's capacity by 122 MW, to 358 MW. The project has a 6-year PPA with a state-owned utility and is expected to come on-line during the first half of 2017.
  • In October, the Company closed financing and began construction of the recently-acquired 72 MW fuel oil-fired Estrella del Mar I power barge in Panama. The project has a 5-year PPA with a state-owned generation company and is expected to come on-line in the first half of 2015.

• The Company achieved significant milestones toward advancing its development pipeline in the United States.
  • In October, AES Southland in California was awarded 20-year Power Purchase Agreements by Southern California Edison, to build and operate 1,384 MW of combined cycle gas-fired generation and battery-based energy storage.
  • In October, Indianapolis Power & Light in Indiana submitted a request for approval from the Indiana Utility Regulatory Commission to invest $332 million, to comply with wastewater regulations and convert Harding Street Station Unit 7 from coal to natural gas.

Non-GAAP Financial Measures

See Non-GAAP Financial Measures for definitions of Adjusted Earnings Per Share, Adjusted Pre-Tax Contribution, Proportional Free Cash Flow, as well as reconciliations to the most comparable GAAP financial measures.

Attachments

Consolidated Statements of Operations, Consolidated Balance Sheets, Segment Information, Consolidated Statements of Cash Flows, Non-GAAP Financial Measures, Parent Financial Information, 2014 Financial Guidance Elements and 2015 Financial Guidance Elements.

Conference Call Information

AES will host a conference call on Thursday, November 6, 2014 at 9:00 a.m. Eastern Standard Time (EST). Interested parties may listen to the teleconference by dialing 1-877-201-0168 at least ten minutes before the start of the call. International callers should dial +1-647-788-4901. The Conference ID for this call is 14719881. Internet access to the presentation materials will be available on the AES website at www.aes.com by selecting “Investors” and then “Presentations and Webcasts.”

A webcast replay, as well as a replay in downloadable MP3 format, will be accessible at www.aes.com beginning shortly after the completion of the call.

About AES

The AES Corporation (NYSE: AES) is a Fortune 200 global power company. We provide affordable, sustainable energy to 20 countries through our diverse portfolio of distribution businesses as well as thermal and renewable generation facilities. Our workforce of 17,800 people is committed to operational excellence and meeting the world’s changing power needs. Our 2013 revenues were $16 billion and we own and manage $40 billion in total assets. To learn more, please visit www.aes.com. Follow AES on Twitter @TheAESCorp.

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’ current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to, our accurate projections of future interest rates, commodity price and foreign currency pricing, continued normal levels of operating performance and electricity volume 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 investments at 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’ filings with the Securities and Exchange Commission (the “SEC”), including, but not limited to, the risks discussed under Item 1A “Risk Factors” and Item 7: Management’s Discussion & Analysis in AES’ 2013 Annual Report on Form 10-K and in subsequent reports filed with the SEC. Readers are encouraged to read AES’ filings to learn more about the risk factors associated with AES’ business. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Any Stockholder who desires a copy of the Company’s 2013 Annual Report on Form 10-K dated on or about February 25, 2014 with the SEC may obtain a copy (excluding Exhibits) without charge by addressing a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203. Exhibits also may be requested, but a charge equal to the reproduction cost thereof will be made. A copy of the Form 10-K may be obtained by visiting the Company’s website at www.aes.com.

THE AES CORPORATION
NON-GAAP FINANCIAL MEASURES
(Unaudited)

RECONCILIATION OF ADJUSTED PRE-TAX CONTRIBUTION (PTC) AND ADJUSTED EPS

Adjusted pre-tax contribution (“adjusted PTC”) and Adjusted earnings per share (“adjusted EPS”) are non-GAAP supplemental measures that are used by management and external users of our consolidated financial statements such as investors, industry analysts and lenders.

We define adjusted PTC as pre-tax income from continuing operations attributable to AES excluding gains or losses of the consolidated entity due to (a) unrealized gains or losses related to derivative transactions, (b) unrealized foreign currency gains or losses, (c) gains or losses due to dispositions and acquisitions of business interests, (d) losses due to impairments, and (e) costs due to the early retirement of debt. 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.

We define adjusted EPS 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, (b) unrealized foreign currency gains or losses, (c) gains or losses due to dispositions and acquisitions of business interests, (d) losses due to impairments, and (e) costs due to the early retirement of debt.

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, unrealized foreign currency gains or losses, losses due to impairments and strategic decisions to dispose of or acquire business interests or retire debt, 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.