June 18, The AES Corporation. JP Morgan Energy Conference

Transcription

1 June 18, 2018 The AES Corporation JP Morgan Energy Conference

2 Safe Harbor Discosure Certain statements in the foowing presentation regarding AES business operations may constitute forward-ooking statements. Such forward-ooking statements incude, but are not imited to, those reated to future earnings growth and financia and operating performance. Forward-ooking statements are not intended to be a guarantee of future resuts, but instead constitute AES current expectations based on reasonabe assumptions. Forecasted financia information is based on certain materia assumptions. These assumptions incude, but are not imited to, accurate projections of future interest rates, commodity prices and foreign currency pricing, continued norma or better eves of operating performance and eectricity demand at our distribution companies and operationa performance at our generation businesses consistent with historica eves, as we as achievements of panned productivity improvements and incrementa growth from investments at investment eves and rates of return consistent with prior experience. For additiona assumptions see Side 34 and the Appendix to this presentation. Actua resuts coud differ materiay from those projected in our forward-ooking statements due to risks, uncertainties and other factors. Important factors that coud affect actua resuts are discussed in AES fiings with the Securities and Exchange Commission incuding but not imited to the risks discussed under Item 1A Risk Factors and Item 7: Management s Discussion & Anaysis in AES 2017 Annua Report on Form 10-K, as we as our other SEC fiings. AES undertakes no obigation to update or revise any forward-ooking statements, whether as a resut of new information, future events or otherwise. Reconciiation to U.S. GAAP Financia Information The foowing presentation incudes certain non-gaap financia measures as defined in Reguation G under the Securities Exchange Act of 1934, as amended. Schedues are incuded herein that reconcie the non-gaap financia measures incuded in the foowing presentation to the most directy comparabe financia measures cacuated and presented in accordance with U.S. GAAP. 2

3 Continuing to Transform and Simpify, Whie Achieving Our Financia Objectives Strong Portfoio of Contracted Generation and Reguated Utiities Improving Risk Profie Efficiency Profitabe Growth On track to achieve investment grade Reshaping portfoio Improving average contract ife Reducing carbon intensity Impemented $100 miion cost savings program 4 GW under construction Deivering attractive returns from renewabes, LNG and new technoogies Attractive Dividend Yied and 8% to 10% Average Annua Growth in Adjusted EPS 1 and Parent Free Cash Fow 1 Through A non-gaap financia measure. See Appendix for definition. 3

4 Business Managed in Four Strategic Business Units (SBUs) % = 2018 Expected Adjusted Pre-Tax Contribution (PTC) 1 31% US & Utiities Netherands UK Bugaria Jordan 13% Eurasia United States 20% MCAC 2 Mexico 36% South America E Savador Panama Coombia Chie Dominican Repubic Puerto Rico Brazi Argentina India Vietnam 1. A non-gaap financia measure. See Appendix for definition and reconciiation Adjusted PTC of $1.5 biion before Corporate charges of $0.4 biion. 2. Mexico, Centra America and the Caribbean. 4

5 Continuing to Improve Our Debt Profie $ in Miions Since 2011, Reduced Parent Debt by $2.6 Biion or 40% $6,515 ($1,845) ($826) $3,844 $257 $4,101 Parent Debt as of December 31, Debt Pay Down YTD 2018 Pay Down Parent Debt Proforma to YTD 2018 Pay Down Temporary Borrowings Under Revover Parent Debt as of March 31,

6 Significant Deevering and Portfoio Transformation Refect in Positive Actions by Rating Agencies Apri December March Upgraded Corporate Rating to BB Upgraded Corporate Rating to BB; Revised Outook to Positive Upgraded Corporate Rating to BB May March May Upgraded Corporate Rating to Ba2 Revised Outook to Ba2 Positive Upgraded Corporate Rating to BB+; Revised Outook to Stabe 6

7 Successfuy Extending Contract Duration of Generation Portfoio, Which Represents ~85% of Portfoio Profitabiity Average Contract Life (Years) Growth: spower, Coón CCGT Saes: DPL, Kazakhstan, Masinoc Growth: Southand, OPGC 2, Mesa La Paz, renewabe growth Bended Average Life is 13 Years in 2020, After Considering Reguated Utiities 1, Which Represent ~15% of Portfoio Profitabiity 1. Assumes 30-year ife as a proxy. 7

8 Carbon Intensity Reduction Targets Carbon Intensity (Tons of CO 2 /MWh of Generation) : 50% Reduction in Carbon Intensity : 25% Reduction in Carbon Intensity Actua 2017 Actua : Reduction of 20 Miion Tons of CO 2 Emissions 8

9 Enhancing Efficiency: Impemented New $100 Miion 1 Annua Recurring Cost Reduction Program $ in Miions Expect to Achieve $500 Miion in Cost Savings by 2020 $500 $100 $100 $300 $ Actua Estimate Tota Competed Prior Target Newy Impemented Cost Reduction Program 1. Announced on Q ca on February 27,

10 Profitabe Growth: Southand in Caifornia 1,284 MW CCGT, COD1: 1H MW Energy Storage, COD1 1H year PPAs with Southern Caifornia Edison Construction proceeding as panned 100 MW of 4-hour duration energy storage word s argest ithium-ion energy storage faciity coming onine in 1H Commercia Operations Date. 10

11 Profitabe Growth: Coón in Panama 380 MW CCGT and 70 TBTU LNG Tank and Regasification Faciity COD1: 2H 2018 (CCGT) and 2019 (LNG) Achieved first fire of CCGT in Apri 2018 Regasification faciity near competion Reception of first LNG shipment in June Power pant to utiize ony one-third of termina capacity Making good progress on LNG tank Expected competion in 1H Commercia Operations Date. 11

12 Profitabe Growth: Pioneering Soar + Storage Awarded 47 MW of Soar Pus 34 MW of 5-Hour Duration Energy Storage in Hawaii 25-year PPAs with Kaua i Isand Utiity Cooperative (KIUC) Provides peaking capacity and 24/7 energy At 170 MWh, it wi be the biggest soar + storage instaation in the word COD 1 expected in Commercia Operations Date. 12

13 Profitabe Growth: Deivering Attractive Risk-Adjusted Returns Focus: Natura Gas & Renewabes with Long-Term, USD-Denominated Contracts Levered After-Tax Returns on 2017 Renewabe Growth Investments 17% 16% 10% US Brazi MCAC 1 1. Mexico, Centra America and the Caribbean. 13

14 Profitabe Growth: Renewabes in the United States and Argentina Signed Long-Term PPAs for 838 MW of Soar and Wind United States spower signed 618 MW of soar and wind PPAs year term AES Distributed Energy signed 120 MW of soar PPAs year term Argentina AES Argentina agreed to acquire the 100 MW Energética wind deveopment project 20-year, U.S. Doar-denominated PPA AES Argentina wi use oca debt capacity to fund the project Construction to Begin in 2018; Competion in

15 Profitabe Growth: Adding up to 6.6 GW of New Capacity Through ,381 6,624 1,230 3, , Tota Renewabes Acquired Competed Construction Tota Capacity Under Construction Renewabes Under Signed PPAs/Excusive Negotiations Renewabes in Advanced Deveopment 15

16 Profitabe Growth: Positioned to Benefit from Increased Use of LNG Own the ony two LNG storage terminas in Centra America and the Caribbean with exporting capabiity and with annua instaed capacity of 150 TBTU Haf of our capacity is contracted, and the remaining capacity is avaiabe to meet demand that is expected to grow six-fod, to 800 TBTU per year Potentia growth driven by: The power generation sector, where approximatey 75% of instaed capacity is costy diese or environmentay unfriendy heavy fue oi Large industria users, such as refineries and cement producers The transportation sector, particuary passenger ships, trucks and buses 16

17 Appying New Technoogies Fuence Energy Storage Joint Venture with Siemens Battery-based energy storage expected to grow ten-fod in five years, to at east 28 GW by 2022 Our goba presence 259 MW in operation 255 MW under construction or signed contracts Strong deveopment pipeine Pursuing 2.5 GW of saes opportunities 17

18 Appying New Technoogies: Digita Business Patforms Improving Customer Experience and Actions 18

19 Adjusted EPS 1 Guidance and Expectations $ Per Share $1.15-$1.25 $ New businesses, incuding US renewabes, fu year of DPP CCGT, Coón CCGT + DPL reguatory + South America + Cost savings + Parent interest Saes of Masinoc, Kazakhstan Tax reform 8%-10% Average Annua Growth Actua 2018 Guidance 2020 Expectation 1. A non-gaap financia measure. See Appendix for definition. The Company is not abe to provide a corresponding GAAP equivaent or reconciiation for its Adjusted EPS guidance without unreasonabe effort. See Side 33 for a description of the adjustments to reconcie Adjusted EPS to diuted EPS for the quarter ended March 31, From 2017 Adjusted EPS of $

20 Parent Free Cash Fow 1 Expectations $ in Miions $637 $600-$675 + Higher margins + Cost savings + Parent interest Gener Utiity tax sharing payments Restructuring costs 8%-10% Average Annua Growth Actua 2018 Expectation 2020 Expectation 1. A non-gaap financia measure. See Appendix for definition. 2. From 2017 Parent Free Cash Fow of $637 miion. 20

21 2018 Parent Capita Aocation Pan $ in Miions Discretionary Cash Sources ($1,899) Discretionary Cash Uses ($1,899) $1,250 $600-$675 $1,899 Repayment of Revover & Other Temporary Borrowings $400 Unaocated $105 Investments in Subsidiaries $250 $344 Sharehoder Dividend $11 $800 Beginning Cash Masinoc & Pacehoder Asset Sae Proceeds Parent FCF 1 Tota Discretionary Cash Debt Prepayment Aocated 86% of Discretionary Cash Toward Deevering and Dividend 1. A non-gaap financia measure. See Appendix for definition and reconciiation to the nearest GAAP measure. 21

22 : $4.2 Biion 1 of Discretionary Cash Avaiabe for Aocation $ in Miions Potentia Debt Paydown 2018 Repayment of Revover & Other Temporary Borrowings $400 $450 $800 Unaocated Discretionary Cash Growth investments Return of cash to sharehoders 2018 Debt Prepayment $800 $750 Identified Investments in Subsidiaries $1,030 Sharehoder Dividend 2 Discipined Capita Aocation to Maximize Risk-Adjusted Tota Sharehoder Return 1. Incudes: $11 beginning cash; $2,000 asset sae proceeds; and Parent Free Cash Fow of approximatey $2,219. Parent Free Cash Fow based on the mid-point of 2018 expectation of $638, pus $1,581 for (based on the mid-point of our 8%-10% average annua growth rate off 2017 actua of $637). 2. Assumes constant payment of $0.13 per share each quarter on 660 miion shares outstanding. 22

23 Continuing to Transform and Simpify, Whie Achieving Our Financia Objectives Strong Portfoio of Contracted Generation and Reguated Utiities Improving Risk Profie Efficiency Profitabe Growth On track to achieve investment grade Reshaping portfoio Improving average contract ife Reducing carbon intensity Impemented $100 miion cost savings program 4 GW under construction Deivering attractive returns from renewabes, LNG and new technoogies Attractive Dividend Yied and 8% to 10% Average Annua Growth in Adjusted EPS 1 and Parent Free Cash Fow 1 Through A non-gaap financia measure. See Appendix for definition. 23

24 Appendix Ato Maipo Side 25 Tota Debt Side 26 Currencies and Commodities Sides AES Modeing Discosures Side Adjusted PTC 1 Modeing Ranges Side 31 Construction Program Side 32 Reconciiation Side 33 Assumptions & Definitions Sides A non-gaap financia measure. 24

25 Competed Restructuring of Ato Maipo Significanty reduced the risk associated with the 531 MW Ato Maipo hydro project in Chie Signed a fixed price contract with Strabag, which we expect to be effective this week, upon competion of customary conditions w w w Transfers a geoogica risks to the contractor Firm competion date Strong performance guarantees AES Gener, in which AES has a 67% ownership interest, is committing up to $400 miion $200 miion, which wi be contributed aong with additiona non-recourse debt Additiona $200 miion to be paid toward the end of construction and wi be used either to fund the remaining project cost, or to prepay project debt On an ownership-adjusted basis, AES investment exposure wi increase by $270 miion To be funded from ocay generated cash fow at AES Gener Aready budgeted in prior Parent Free Cash Fow 1 expectations Once competed, Ato Maipo wi diversify AES Gener s generation mix, reducing its coa weighting in Chie from 72% to 64% 1. A non-gaap financia measure. See definitions. 25

26 Reduced Tota Debt by 41% Before Re-Levering for New Projects $ in Miions $22,633 $6,800 $20,109 $6,515 ($3,477) $4,101 ($3,433) ($2,414) $16,118 $13,309 $16,008 Debt Outstanding as of December 31, 2011 Non-Recourse Debt at Sod Assets Non-Recourse Debt Amortization Recourse Debt Amortization Non-Recourse Debt for New Projects Debt Outstanding as of March 31, 2018 Non-Recourse Debt Recourse Debt 26

27 Year-to-Go 2018 Guidance Estimated Sensitivities Interest Rates bps move in interest rates over year-to-go 2018 is forecasted to have a change in EPS of approximatey $ % appreciation in USD against the foowing key currencies is forecasted to have the foowing negative EPS impacts: Average Rate Year-to-Go 2018 Sensitivity Braziian Rea (BRL) 3.35 Less than $0.005, Long Exposure Currencies Coombian Peso (COP) 2,814 $0.005, Long Exposure Euro (EUR) 1.24 Less than $0.005, Long Exposure Great British Pound (GBP) 1.41 Less than $0.005, Long Exposure Argentine Peso (ARS) Less than ($0.005), Short Exposure Chiean Peso (CLP) 605 Less than ($0.005), Short Exposure 10% increase in commodity prices is forecasted to have the foowing EPS impacts: Average Rate Year-to-Go 2018 Sensitivity Commodity Iinois Basin Coa $37/ton Rotterdam Coa (API 2) $79/ton Less than $0.005, Short Exposure NYMEX WTI Crude Oi $63/bb IPE Brent Crude Oi $68/bb $0.005, Long Exposure NYMEX Henry Hub Natura Gas $2.8/mmbtu UK Nationa Baancing Point Natura Gas 0.5/therm $0.005, Long Exposure US Power (DPL) PJM AD Hub $30/MWh $0.005, Long Exposure Note: Guidance provided on May 8, Sensitivities are provided on a standaone basis, assuming no change in the other factors, to iustrate the magnitude and direction of changing market factors on AES resuts. Estimates show the impact on year-to-go 2018 Adjusted EPS. Actua resuts may differ from the sensitivities provided due to execution of risk management strategies, oca market dynamics and operationa factors. Fu year 2018 guidance is based on currency and commodity forward curves and forecasts as of March 31, There are inherent uncertainties in the forecasting process and actua resuts may differ from projections. The Company undertakes no obigation to update the guidance presented. Pease see Item 1 of the Form 10-K for a more compete discussion of this topic. AES has exposure to mutipe coa, oi, and natura gas, and power indices; forward curves are provided for representative iquid markets. Sensitivities are rounded to the nearest $0.005 cent per share. 1. The move is appied to the foating interest rate portfoio baances as of March 31,

28 Foreign Exchange (FX) Risk Before Hedges Long Exposures Fu Year 2020 FX Sensitivity by Currency 1 (Cents Per Share, Exposures Before Hedges) 0.5 Short Exposures Argentine Peso Braziian Rea Chiean Peso Coombian Peso Euro Indian Rupee Tota 2020 correated FX risk before hedges is $0.02 for 10% USD appreciation FX risk mitigated on a roing basis by active FX hedging 1. Sensitivity represents fu year 2020 exposure to a 10% appreciation of USD reative to foreign currency as of December 31,

29 Commodity Exposure is Mosty Hedged in the Medium- to Long-Term Cents Per Share Fu Year 2020 Adjusted EPS 1 Commodity Sensitivity 2 for 10% Change in Commodity Prices Coa Gas Oi 1. A non-gaap financia measure. See definitions. 2. Domestic and Internationa sensitivities are combined and assumes each fue category moves 10% reative to commodities as of December 31, Adjusted EPS is negativey correated to coa price movement, and positivey correated to gas, oi and power price movements. 29

30 AES Modeing Discosures $ in Miions Parent Company Cash Fow Assumptions Subsidiary Distributions (a) $1,203 $1,100-$1,175 Cash Interest (b) ($290) ($250) Corporate Overhead ($179) ($140) Parent-Funded SBU Overhead ($93) ($90) Business Deveopment ($4) ($20) Cash for Deveopment, Genera & Administrative and Tax (c) ($276) ($250) Parent Free Cash Fow 1 (a b c) $637 $600-$ A non-gaap financia measure. See definitions. 30

31 2018 Adjusted PTC Modeing Ranges $ in Miions SBU US and Utiities $440-$500 South America $530-$ Adjusted PTC Modeing Ranges as of 5/8/18 1 Drivers of Growth Versus Soar + DPL reguatory impact of hurricanes Pass through of tax reform at IPL + Argentina reforms + Higher generation at Chivor + Higher generation in Chie 2017 gain on ega settement MCAC $300-$330 + Fu year of DPP CCGT Eurasia $180-$210 Tota SBUs $1,450-$1,630 Corporate & Other 2 ($340)-($380) Tota AES Adjusted PTC 1.2 $1,110-$1,250 Masinoc Kazakhstan + G&A savings + Parent interest 1. A non-gaap financia metric. See definitions. 2. Tota AES Adjusted PTC incudes after-tax adjusted equity in earnings. 31

32 Construction Pipeine Detais $ in Miions, Uness Otherwise Stated Project Country AES Ownership Fue Gross MW Expected COD Tota Capex Tota AES Equity Comments Construction Projects Coming On-Line Coón Panama 50% Gas 380 2H 2018 $1,003 $201 Regasification and LNG storage tank expected on-ine in 2019 OPGC 2 India 49% Coa 1,320 2H 2018 $1,585 $227 Southand Repowering US-CA 100% Gas 1,284 1H 2020 $2,287 $329 Excudes 100 MW of energy storage expected to come onine in 1H 2021 Ato Maipo Chie 62% Hydro 531 2H 2020 $3,439 $683 Previous Tota Capex of $2,513 Tota 3,515 $8,314 $1,440 32

33 Reconciiation of Q1 Adjusted PTC 1 and Adjusted EPS 1 $ in Miions, Except Per Share Amounts Income (Loss) from Continuing Operations, Net of Tax, Attributabe to AES and Diuted EPS Net of NCI 2 Q Q Per Share (Diuted) Net of NCI 2 Net of NCI 2 Per Share (Diuted) Net of NCI 2 $685 $1.03 ($24) ($0.04) 3 Add: Income Tax Expense Attributabe to AES $198 $20 Pre-Tax Contribution $883 ($4) Adjustments Unreaized Derivative and Equity Securities Losses (Gains) $12 $0.02 ($1) - Unreaized Foreign Currency Transaction (Gains) ($3) - ($9) ($0.01) Disposition/Acquisition Losses (Gains) ($778) ($1.17) 4 $52 $ Impairment Expense - - $168 $ Losses (Gains) on Extinguishment of Debt $171 $ ($16) ($0.02) 8 Restructuring Costs $ Less: Net Income Tax Expense (Benefit) - $ ($0.09) 10 Adjusted PTC 1 & Adjusted EPS 1 $288 $0.28 $190 $ Non-GAAP financia measures. See definitions. 2. NCI is defined as Noncontroing Interests. 3. Diuted oss per share under GAAP excudes common stock equivaents from the weighted average shares outstanding of 659 miion as their incusion woud be anti-diutive. However, for the cacuation of Adjusted EPS, 3 miion of diutive common stock equivaents were incuded in the weighted average shares outstanding of 662 miion. 4. Amount primariy reates to gain on sae of Masinoc of $777 miion, or $1.17 per share. 5. Amount primariy reates to reaized derivative osses associated with the sae of Su of $38 miion, or $0.06 per share; costs associated with eary pant cosures at DPL of $20 miion, or $0.03 per share; partiay offset by interest earned on Su sae proceeds prior to repatriation of $6 miion, or $0.01 per share. 6. Amount primariy reates to asset impairments at Kazakhstan of $94 miion, or $0.14 per share and at DPL of $66 miion, or $0.10 per share. 7. Amount primariy reates to oss on eary retirement of debt at the Parent Company of $169 miion, or $0.26 per share. 8. Amount primariy reates to gain on eary retirement of debt at Aicura of $65 miion, or $0.10 per share, partiay offset by the oss on eary retirement of debt at the Parent Company of $47 miion, or $0.07 per share. 9. Amount primariy reates to the income tax expense under the GILTI provision associated with gain on sae of Masinoc of $155 miion, or $0.23 per share, partiay offset by income tax benefits associated with the oss on eary retirement of debt at the Parent Company of $53 miion, or $0.08 per share. 10. Amount primariy reates to the income tax benefits associated with asset impairments of $51 miion, or $0.08 per share and dispositions of $16 miion, or $0.02 per share. 33

34 Assumptions Forecasted financia information is based on certain materia assumptions. Such assumptions incude, but are not imited to: (a) no unforeseen externa events such as wars, depressions, or economic or poitica disruptions occur; (b) businesses continue to operate in a manner consistent with or better than prior operating performance, incuding achievement of panned productivity improvements incuding benefits of goba sourcing, and in accordance with the provisions of their reevant contracts or concessions; (c) new business opportunities are avaiabe to AES in sufficient quantity to achieve its growth objectives; (d) no materia disruptions or discontinuities occur in the Gross Domestic Product (GDP), foreign exchange rates, infation or interest rates during the forecast period; and (e) materia business-specific risks as described in the Company s SEC fiings do not occur individuay or cumuativey. In addition, benefits from goba sourcing incude avoided costs, reduction in capita project costs versus budgetary estimates, and projected savings based on assumed spend voume which may or may not actuay be achieved. Aso, improvement in certain Key Performance Indicators (KPIs) such as equivaent forced outage rate and commercia avaiabiity may not improve financia performance at a faciities based on commercia terms and conditions. These benefits wi not be fuy refected in the Company s consoidated financia resuts. The cash hed at quaified hoding companies ( QHCs ) represents cash sent to subsidiaries of the Company domicied outside of the U.S. Such subsidiaries had no contractua restrictions on their abiity to send cash to AES, the Parent Company, however, cash hed at quaified hoding companies does not refect the impact of any tax iabiities that may resut from any such cash being repatriated to the Parent Company in the U.S. Cash at those subsidiaries was used for investment and reated activities outside of the U.S. These investments incuded equity investments and oans to other foreign subsidiaries as we as deveopment and genera costs and expenses incurred outside the U.S. Since the cash hed by these QHCs is avaiabe to the Parent, AES uses the combined measure of subsidiary distributions to Parent and QHCs as a usefu measure of cash avaiabe to the Parent to meet its internationa iquidity needs. AES beieves that unconsoidated parent company iquidity is important to the iquidity position of AES as a parent company because of the non-recourse nature of most of AES indebtedness. 34

35 Definitions Adjusted Earnings Per Share, a non-gaap financia measure, is defined as diuted earnings per share from continuing operations excuding gains or osses of both consoidated entities and entities accounted for under the equity method due to (a) unreaized gains or osses reated to derivative transactions and equity securities; (b) unreaized foreign currency gains or osses; (c) gains or osses and associated benefits and costs due to dispositions and acquisitions of business interests, incuding eary pant cosures, and the tax impact from the repatriation of saes proceeds; (d) osses due to impairments; (e) gains, osses and costs due to the eary retirement of debt; (f) costs directy associated with a major restructuring program, incuding, but not imited to, workforce reduction efforts, reocations, and office consoidation; and (g) tax benefit or expense reated to the enactment effects of 2017 U.S. tax aw reform. Adjusted Pre-Tax Contribution, a non-gaap financia measure, is defined as pre-tax income from continuing operations attributabe to The AES Corporation excuding gains or osses of the consoidated entity due to (a) unreaized gains or osses reated to derivative transactions and equity securities; (b) unreaized foreign currency gains or osses; (c) gains, osses and associated benefits and costs due to dispositions and acquisitions of business interests, incuding eary pant cosures; (d) osses due to impairments; (e) gains, osses and costs due to the eary retirement of debt; and (f) costs directy associated with a major restructuring program, incuding, but not imited to, workforce reduction efforts, reocations, and office consoidation. Adjusted PTC aso incudes net equity in earnings of affiiates on an after-tax basis adjusted for the same gains or osses excuded from consoidated entities. Adjusted PTC refects the impact of NCI and excudes the items specified in the definition above. In addition to the revenue and cost of saes refected in Operating Margin, Adjusted PTC incudes the other components of our income statement, such as genera and administrative expenses in the corporate segment, as we as business deveopment costs, interest expense and interest income, other expense and other income, reaized foreign currency transaction gains and osses, and net equity in earnings of affiiates. NCI is defined as noncontroing interests. Parent Company Liquidity (a non-gaap financia measure) is defined as as cash avaiabe to the Parent Company pus avaiabe borrowings under existing credit faciity pus cash at quaified hoding companies ( QHCs ). The cash hed at quaified hoding companies represents cash sent to subsidiaries of the Company domicied outside of the U.S. Such subsidiaries have no contractua restrictions on their abiity to send cash to the Parent Company. Parent Free Cash Fow (a non-gaap financia measure) shoud not be construed as an aternative to Net Cash Provided by Operating Activities which is determined in accordance with GAAP. Parent Free Cash Fow is equa to Subsidiary Distributions ess cash used for interest costs, deveopment, genera and administrative activities, and tax payments by the Parent Company. Parent Free Cash Fow is used for dividends, share repurchases, growth investments, recourse debt repayments, and other uses by the Parent Company. Subsidiary Liquidity (a non-gaap financia measure) is defined as cash and cash equivaents and bank ines of credit at various subsidiaries. Subsidiary Distributions shoud not be construed as an aternative to Net Cash Provided by Operating Activities which is determined in accordance with GAAP. Subsidiary Distributions are important to the Parent Company because the Parent Company is a hoding company that does not derive any significant direct revenues from its own activities but instead reies on its subsidiaries business activities and the resutant distributions to fund the debt service, investment and other cash needs of the hoding company. The reconciiation of the difference between the Subsidiary Distributions and Net Cash Provided by Operating Activities consists of cash generated from operating activities that is retained at the subsidiaries for a variety of reasons which are both discretionary and non-discretionary in nature. These factors incude, but are not imited to, retention of cash to fund capita expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and reated debt service requirements at the subsidiaries, retention of cash reated to sufficiency of oca GAAP statutory retained earnings at the subsidiaries, retention of cash for working capita needs at the subsidiaries, and other simiar timing differences between when the cash is generated at the subsidiaries and when it reaches the Parent Company and reated hoding companies. 35