The condensed consolidated financial statements included in Item 1.-Financial Statements of this Form 10-Q and the discussions contained herein should be read in conjunction with our 2019 Form 10-K. Forward-Looking Information The following discussion may contain forward-looking statements regarding us, our business, prospects and our results of operations, including our expectations regarding the impact of the COVID-19 pandemic on our business, that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. These statements include, but are not limited to, statements regarding management's intents, beliefs, and current expectations and typically contain, but are not limited to, the terms "anticipate," "potential," "expect," "forecast," "target," "will," "would," "intend," "believe," "project," "estimate," "plan," and similar words. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute current expectations based on reasonable assumptions. Factors that could cause or contribute to such differences include, but are not limited to, those described in Item 1A.-Risk Factors of this Form 10-Q, Item 1A.-Risk Factors and Item 7.-Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2019 Form 10-K and subsequent filings with theSEC . Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with theSEC that advise of the risks and factors that may affect our business. Overview of Our Business We are a diversified power generation and utility company organized into the following four market-oriented SBUs: US and Utilities (United States ,Puerto Rico andEl Salvador );South America (Chile ,Colombia ,Argentina andBrazil ); MCAC (Mexico ,Central America and theCaribbean ); and Eurasia (Europe andAsia ). For additional information regarding our business, see Item 1.-Business of our 2019 Form 10-K. We have two lines of business: generation and utilities. Each of our SBUs participates in our first business line, generation, in which we own and/or operate power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries. Our US and Utilities SBU participates in our second business line, utilities, in which we own and/or operate utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors within a defined service area. In certain circumstances, our utilities also generate and sell electricity on the wholesale market. Executive Summary Compared with last year, third quarter diluted earnings per share from continuing operations decreased$0.82 to a loss of$0.50 . This decrease reflects higher impairments and losses on sales in the current period, and lower contributions from our MCAC SBU largely due to prior year net insurance recoveries; partially offset by lower income tax expense and higher margins at our South America SBU largely due to net gains from early contract terminations at Angamos. Adjusted EPS, a non-GAAP measure, decreased$0.06 to$0.42 , mainly due to lower contributions from our MCAC SBU largely due to prior year net insurance recoveries, partially offset by a lower adjusted tax rate. Compared with last year, diluted earnings per share from continuing operations for the nine months endedSeptember 30, 2020 decreased$0.98 to a loss of$0.41 . This decrease reflects higher impairments and losses on sales in the current period, lower contributions from our US and Utilities SBU primarily driven by the realization of the anticipated impact of COVID-19 on demand and lower regulated rates as a result of the changes in DP&L's ESP, and prior year net insurance recoveries; partially offset by lower income tax expense, higher margins at ourSouth America and MCAC SBUs largely due to net gains from early contract terminations at Angamos and higher availability and improved hydrology inPanama , respectively, a gain on sale of land in theU.S. , and a positive impact inChile due to incremental capitalized interest. Adjusted EPS, a non-GAAP measure, decreased$0.06 to$0.96 , mainly due to lower contributions from our
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(1) See Item 2.-Management's Discussion and Analysis of Financial Condition and Results of Operations-SBU Performance Analysis-Non-GAAP Measures for reconciliation and definition. (2) GWh sold in 2019.
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33 |The AES Corporation |September 30, 2020 Form 10-Q Overview of Strategic Performance AES is leading the industry's transition to clean energy by investing in sustainable growth and innovative solutions. The Company is taking advantage of favorable trends in clean power generation, transmission and distribution, and LNG infrastructure to deliver superior results. Sustainable Growth: Through its presence in key growth markets, AES is well-positioned to benefit from the global transition toward a more sustainable power generation mix. •In year-to-date 2020, the Company completed construction of 1,754 MW of new projects, including: •1,299 MW Southland repowering project inSouthern California ; •100 MW Vientos Bonaerenses wind facility inArgentina ; •100 MW Vientos Neuquinos wind facility inArgentina ; •80 MW Andes 2a solar facility inChile ; •75 MW Pleinmont 1 solar facility inVirginia ; •57 MW of solar and solar plus storage in theU.S. atAES Distributed Energy ; •28 MW Na Pua Makani wind facility inHawaii ; •10MW Alfalfal Virtual Reservoir energy storage facility inChile ; and •5 MW Opico solar facility inEl Salvador . •In year-to-date 2020, the Company was awarded or signed 2,093 MW of renewables and energy storage under long-term PPAs: •1,173 MW of wind and solar atAES Gener inChile andColombia ; •542 MW of energy storage, solar and solar plus storage in theU.S. ; •187 MW of wind at AES Tietê inBrazil ; •109 MW of wind inMexico ; and •82 MW of wind and solar inPanama and theDominican Republic . •The Company's backlog of 6,806 MW of renewables now includes: •2,168 MW under construction and expected on-line through 2021; and •4,638 MW of renewables signed under long-term PPAs or awarded. •The Company has reduced its coal-fired generation to 29% of total generation volume (proforma for asset sales and retirements announced in 2020) and is on track to further reduce its coal-fired generation to less than 10% by year-end 2030. •InNovember 2020 , the Company announced the retirement of 1,158 MW of coal-fired generation, which will decrease the Company's generation from coal by 5 percentage points, to approximately 29% of its total generation. ?630 MW Petersburg Units 1 and 2 inIndiana ; ?322 MW Ventanas Units 1 and 2 inChile ; and ?206 MW AES Hawaii. Innovative Solutions: The Company is developing and deploying innovative solutions such as battery-based energy storage, digital customer interfaces and energy management. •Fluence, the Company's joint venture with Siemens, is the global leader in the fast-growing energy storage market, which is expected to increase by 15 to 20 GW annually. •In year-to-date 2020, Fluence signed 690 MW of new contracts, bringing its total delivered or awarded to 2.4 GW. Superior Results: By investing in sustainable growth and offering innovative solutions to customers, the Company is transforming its business mix to deliver superior results. •The Company has a resilient and diversified portfolio of electric generation and utilities with credit-worthy offtakers and an average contract life of 14 years.
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