The AES Corporation Second Quarter 2017 Financial Review. August 8, 2017

Transcription

1 The AES Corporation Second Quarter 2017 Financial Review August 8, 2017

2 Safe Harbor Disclosure Certain statements in the following presentation regarding AES business operations may constitute forward-looking statements. 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, accurate projections of future interest rates, commodity prices and foreign currency pricing, continued normal or better levels of operating performance and electricity demand 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 from investments at investment levels and rates of return consistent with prior experience. For additional assumptions see Slide 55 and the Appendix to this presentation. 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 including but not limited to the risks discussed under Item 1A Risk Factors and Item 7: Management s Discussion & Analysis in AES 2016 Annual Report on Form 10-K, as well as our other SEC filings. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Reconciliation to U.S. GAAP Financial Information The following presentation includes certain non-gaap financial measures as defined in Regulation G under the Securities Exchange Act of 1934, as amended. Schedules are included herein that reconcile the non-gaap financial measures included in the following presentation to the most directly comparable financial measures calculated and presented in accordance with U.S. GAAP. 2

3 Q Financial Review Call l Adjusted EPS 1 of $0.25, an increase of $0.08, largely driven by higher availability and capital allocation decisions l Reaffirming 2017 guidance and expectations through 2020 l l l l l l l Evaluating path forward for Alto Maipo hydro project under construction in Chile Successfully completed the expansion of our DPP gas-fired plant in the Dominican Republic Secured $2 billion in non-recourse financing on favorable terms and broke ground on our 1.4 GW Southland re-powering project in California With the exception of Alto Maipo, our 4.7 GW under construction are progressing well and remain on track to be completed through 2020 Closed acquisition of spower, the largest independent solar developer in the United States, to increase our long-term contracted, U.S. Dollar-denominated, renewable portfolio To take advantage of our leadership position in energy storage, we announced a 50/50 joint venture with Siemens to create a global energy storage technology and services company On track to achieve our $400 million per year cost reduction and revenue enhancement program 1. A non-gaap financial measure. See Appendix for definition. 3

4 Alto Maipo in Chile l l As disclosed in May, construction difficulties resulted in projected cost overruns of up to 22% ($460 million) of total project cost Slower than anticipated productivity by construction contractors since last call Alto Maipo terminated one of the project s contractors for performance reasons l In discussion with potential replacement construction contractors and non-recourse lenders Alto Maipo looking for modified construction contracts and financial flexibility l l l AES total exposure to the project is approximately $415 million, 87% of which has already been invested Will be disciplined when it comes to evaluating any incremental investment from AES Gener into Alto Maipo Do not expect any material impact on our 2017 guidance and expectations through

5 DPP in the Dominican Republic 122 MW CCGT Expansion l Recently completed 122 MW expansion of existing DPP plant, for total capacity of 358 MW l One of the lowest cost generators in the Dominican Republic l New capacity contracted under a long-term, U.S. Dollardenominated PPA l Completed on budget for total capex of $260 million, funded through debt capacity at AES Dominicana 5

6 Eagle Valley in Indiana 671 MW CCGT, COD 1 : 1H 2018 l Remain confident that the project will achieve COD 1 in 1H 2018 l EPC contractor, CBI 2, has created positive momentum by subcontracting some critical work in an effort to achieve substantial completion by year-end 2017 Approximately 1,000 workers onsite 1. Commercial Operations Date. 2. Chicago Bridge and Iron Company. 6

7 Southland Repowering in California 1,384 MW Gas and Energy Storage, COD 1 : 1H 2020 (Gas) and 1H 2021 (Energy Storage) l Closed $2 billion in long-term, nonrecourse financing at 4.5% Demonstrates strength of the project, which has 20-year PPAs with Southern California Edison Largest non-recourse financing including a battery-based energy storage project 1. Commercial Operations Date. l Gas-fired capacity will be constructed by Kiewit One of North America s largest engineering and construction contractors Successful track record of completing similar CCGT projects in California 7

8 On Track to Complete Projects Under Construction 4,659 MW Currently Under Construction Coming On-Line Through , , , YTG Total 1. Includes: 79 MW spower (US-CA), 20 MW Dominican Energy Storage (Dominican Republic) and 19 MW Distributed Energy (US). 2. Includes: 1,320 MW OPGC 2 (India), 671 MW Eagle Valley CCGT (US), 380 MW Colón (Panama) and 20 MW Distributed Energy (US). 3. Includes: 531 MW Alto Maipo (Chile) and 335 MW Masinloc 2 (Philippines). 4. Includes: 1,284 MW Southland Re-Powering (US-CA). 8

9 Significant Progress Toward Repositioning Our Portfolio Wind and Solar: Acquired 1.8 GW and Potential to Add at Least 1.5 GW Through , , , Total Acquired Signed PPAs Exclusive Negotiations Advanced Development Note: Solar capacity shown in DC and wind capacity shown in AC. 1. Includes: 1,287 MW spower (solar, US-CA), 386 MW Alto Sertão (wind, Brazil), 75 MW Boa Hora (solar, Brazil) and 28 MW Na Pua Makani (wind, Hawaii). 9

10 Joining Forces with Siemens to Create Fluence New Global Energy Storage Technology and Services Company l Worldwide installed base for energy storage projected to grow to 28 GW over next five years Well-positioned to take advantage and see it as an upside to our outlook l New 50/50 joint venture unites scale, experience and resources of AES and Siemens, to develop new storage solutions and services, reaching customers in more than 160 countries Expected to close in the fourth quarter of this year, following regulatory approvals 10

11 Performance Excellence 1 $ in Millions On Track to Achieve $400 Run Rate through 2020 $50 $25 $25 $400 $50 $ Total 2017 Estimate 2018 Estimate 2019 Estimate 2020 Estimate Total 1. Cost reductions reflected in General and Administrative Expense (G&A), as well as Cost of Sales. Some of the previously reported 2012 and 2013 G&A Expense related to administrative costs at our SBUs has been reclassified to Cost of Sales. 11

12 Q Financial Review l Q results Adjusted EPS 1 Consolidated Free Cash Flow 1 and Adjusted PTC 1 by Strategic Business Unit (SBU) l 2017 Parent capital allocation plan l 2017 Guidance and expectations 1. A non-gaap financial measure. See Appendix for definition. 12

13 Q Adjusted EPS 1 Increased $0.08 $0.08 $0.01 $0.25 $0.17 ($0.01) l 2016: 29% l 2017: 32% l MCAC l Argentina l UK Q SBUs/Corp Tax Capital Allocation Q A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 13

14 Q2 Financial Results $ in Millions l Margins improved primarily due to higher availability in MCAC and Argentina Consolidated FCF 1 Decreased $448; Adjusted PTC 1 Increased $83 $600 Consolidated FCF 1 $554 Adjusted PTC 1 l Adjusted PTC 1 also reflects lower Parent interest expense l Lower Consolidated FCF 1 also reflects the collection of overdue receivables at Maritza in Bulgaria in 2016, and higher working capital requirements in Brazil $500 $400 $300 $200 $137 $106 $160 $243 $100 $13 $0 Q Q Q Q FCF Attributable to NCI 1 1. A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 14

15 Q2 Financial Results: US SBU $ in Millions l Margins declined primarily due to an accrual associated with the 2016 rate order at IPL in Indiana and a reversion to prior ESP rates at DPL in Ohio l Higher Adjusted PTC 1 also reflects growth in distributed energy business l Lower Consolidated FCF 1 also reflects higher working capital requirements at DPL Consolidated FCF 1 Decreased $19; Adjusted PTC 1 Increased $5 $150 $130 $110 $90 $70 $50 $30 Consolidated FCF 1 $123 $6 $104 Adjusted PTC 1 $58 $63 $10 -$10 ($2) Q Q Q Q FCF Attributable to NCI 1 1. A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 15

16 Q2 Financial Results: Andes SBU $ in Millions l Margins improved primarily due to improved availability in Argentina l Lower Adjusted PTC 1 also reflects lower capitalized interest expense on completed construction projects in Chile and lower interest income in Argentina l Higher Consolidated FCF 1 also reflects lower tax payments at Chivor in Colombia, offset by lower VAT refunds and higher tax payments at Gener in Chile Consolidated FCF 1 Increased $2; Adjusted PTC 1 Decreased $2 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Consolidated FCF 1 $77 $79 $21 $21 $84 $82 Q Q Q Q FCF Attributable to NCI Adjusted PTC A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 16

17 Q2 Financial Results: Brazil SBU $ in Millions Consolidated FCF 1 Decreased $178; Adjusted PTC 1 Increased $6 l Margins were flat Consolidated FCF 1 l Lower Consolidated FCF 1 reflects the $160 $125 impact from the recovery of high purchased power costs in 2016 at $110 Eletropaulo, and the sale of Sul $77 Adjusted PTC 1 $60 $10 $7 $13 -$40 -$90 ($45) ($53) Q Q Q Q FCF Attributable to NCI 1 1. A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 17

18 Q2 Financial Results: MCAC SBU $ in Millions Consolidated FCF 1 Increased $28; Adjusted PTC 1 Increased $24 l Margins improved primarily due to higher availability in the Dominican Republic, Mexico and Puerto Rico $120 $100 Consolidated FCF 1 Adjusted PTC 1 $99 $80 $75 $60 $40 $28 $20 $0 -$20 - $6 ($2) Q Q Q Q FCF Attributable to NCI 1 1. A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 18

19 Q2 Financial Results: Europe SBU $ in Millions l Margins improved primarily due to higher capacity margins in the United Kingdom l Lower Consolidated FCF 1 also reflects the collection of overdue receivables in 2016 at Maritza in Bulgaria Consolidated FCF 1 Decreased $293; Adjusted PTC 1 Increased $20 $400 $350 $300 $250 Consolidated FCF 1 $352 $9 Adjusted PTC 1 $200 $150 $100 $50 $59 $13 $34 $54 $0 Q Q Q Q FCF Attributable to NCI 1 1. A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 19

20 Q2 Financial Results: Asia SBU $ in Millions l Margins were flat l Higher Consolidated FCF 1 reflects the timing of fuel payments at Masinloc in the Philippines Consolidated FCF 1 Increased $15; Adjusted PTC 1 Flat $60 $50 $40 Consolidated FCF 1 $38 $53 $28 Adjusted PTC 1 $30 $20 $19 $26 $26 $10 $0 Q Q Q Q FCF Attributable to NCI 1 1. A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 20

21 Regulatory Developments in Ohio Dayton Power & Light (DP&L) l In March, reached settlement agreement with PUCO Staff and various intervenors on Electric Security Plan (ESP) Distribution Modernization Rider of $105 million/year over three years with potential for two-year extension Commenced sale process for Miami Fort, Zimmer and Conesville (1 GW) l Post-hearing brief concluded May 15, 2017 l PUCO approval expected Q l Committed to: Exiting 100% of coal capacity by June 2018 (2.1 GW) Exploring strategic options for remaining generation (1 GW peakers) Reducing debt Taking Active Steps Towards DPL Becoming a Stable and Growing T&D Business 21

22 Improving Our Debt Profile Since 2011, Reduced Parent Debt by 32% or $2.1 Billion ($ in Millions) $6,515 ($530) ($308) ($419) ($240) ($301) ($294) $4,423 Total Parent Debt as of December 31, Total Parent Debt as of June 30,

23 2017 Parent Capital Allocation Plan $ in Millions Discretionary Cash Sources ($1,495-$1,595) $575- $675 $20 $1,495- $1,595 Discretionary Cash Uses ($1,495-$1,595) Debt Prepayment Target Closing Cash Balance $50 $53- Unallocated $153 Discretionary Cash $800 $343 $317 Shareholder Dividend spower Acquisition $382 $350 $100 Beginning Cash Asset Sales Proceeds 1 Parent FCF 2 Return of Capital Total Discretionary Cash Investments in Subsidiaries Maximizing Discretionary Cash to Increase Risk-Adjusted Returns for Shareholders 1. Includes: completed $300 million (Sul, Brazil) and $500 million asset sale proceeds target. 2. A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 23

24 Allocating $3.8 Billion 1 Discretionary Cash Through 2020 to Maximize Risk-Adjusted Returns ; $ in Millions 2017 Parent Debt Prepayment spower Acquisition Committed Investments in Subsidiaries $382 $700 $358 $1,090 Unallocated Discretionary Cash l 8%-10% dividend growth l Modest Parent delevering l Investments in natural gas and renewable projects 3 $1,270 Shareholder Dividend 2 1. Includes: $100 million beginning cash; $800 million asset sale proceeds; and Parent Free Cash Flow of $2,900 million, which is based on the mid-point of 2017 guidance of $625 million, growing at the mid-point of our 8%-10% average annual growth rate through Does not include additional asset sale proceeds. 2. Assumes constant payment of $0.12 per share each quarter on 662 million shares outstanding. 3. Includes investments in renewable development projects in shown on Slide 9. 24

25 Reaffirming Expectations Through 2020 $ in Millions, Except Per Share Amounts FY 2016 Guidance & Expectations FY 2017 Guidance Adjusted EPS 1 $0.95-$1.05 $1.00-$1.10 Consolidated Net Cash Provided by Operating Activities 2020 Expectations 8%-10% growth off mid-point of 2016 guidance $2,000-$2,900 $2,000-$2,800 N/A Consolidated Free Cash Flow 1 $1,300-$2,200 $1,400-$2,000 8%-10% growth off mid-point of 2016 guidance l 2017 guidance based on foreign currency and commodity forward curves as of June 30, A non-gaap financial measure. See Appendix for definition and reconciliation to the nearest GAAP measure. 25

26 Conclusion l Year-to-date results in line with expectations l Resolution of Alto Maipo expected before year-end l To deliver attractive growth, on track to complete remaining construction projects, as well as revenue enhancement and cost reduction initiatives l Repositioning our portfolio by adding renewables and natural gas with longterm, U.S. Dollar-denominated contracts l Continuing to reduce leverage to achieve investment grade metrics by 2020 Reaffirming 8%-10% Average Annual Growth in all Key Financial Metrics Through

27 Appendix l Adjusted EPS 1 Slide 28 l Q2 and Adjusted EPS 1 Roll-Up Slide 29 l Financial Results Slides l Listed Subs & Public Filers Slide 37 l SBU Modeling Disclosures Slides l DPL Inc. Modeling Disclosures Slide 40 l DP&L and DPL Inc. Debt Maturities Slide 41 l Parent Only Cash Flow Slides l Currencies and Commodities Slides l AES Modeling Disclosures Slide 48 l Construction Program Slides 49 l Reconciliations Slides l Assumptions & Definitions Slides A non-gaap financial measure. 27

28 2017 Adjusted EPS 1 Increased $0.10 $0.05 $0.02 $0.02 $0.01 $0.42 $ SBUs/Corp FX Tax Capital Allocation A non-gaap financial measure. See Slide 52 for reconciliation to the nearest GAAP measure and definitions. 28

29 Q2 and 2017 Adjusted EPS 1 Roll-Up $ in Millions, Except Per Share Amounts Adjusted PTC 1 Q Q Variance Variance US $63 $58 $5 $111 $143 ($32) Andes $82 $84 ($2) $170 $145 $25 Brazil $13 $7 $6 $52 $12 $40 MCAC $99 $75 $24 $158 $123 $35 Europe $54 $34 $20 $109 $103 $6 Asia $26 $26 - $48 $48 - Total SBUs $337 $284 $53 $648 $574 $74 Corp/Other ($94) ($124) $30 ($215) ($229) $14 Total AES Adjusted PTC 1,2 $243 $160 $83 $433 $345 $88 Adjusted Effective Tax Rate 32% 29% 36% 39% Diluted Share Count ADJUSTED EPS 1 $0.25 $0.17 $0.08 $0.42 $0.32 $ A non-gaap financial measure. See Slides 51 and 52 for reconciliation to the nearest GAAP measure and definitions. 2. Includes $6 million and $8 million of after-tax equity in earnings for Q and Q2 2016, respectively, and $12 million and $14 million for 2017 and 2016, respectively. 29

30 Financial Results $ in Millions l Margins improved primarily in MCAC, Andes and Brazil Consolidated FCF 1 Decreased $392; Adjusted PTC 1 Increased $88 l Higher Adjusted PTC 1 also reflects the successful settlement of a legal dispute in Brazil l Lower Consolidated FCF 1 also reflects the receipt of overdue receivables at Maritza in Bulgaria in 2016, and higher working capital requirements in Brazil $1,200 $1,000 $800 $600 $400 $200 Consolidated FCF 1 $1,044 $374 $652 $291 Adjusted PTC 1 $345 $433 $ FCF Attributable to NCI 1 1. A non-gaap financial measure. See Slides 50 and 52 for reconciliation to the nearest GAAP measure and definitions. 30

31 Financial Results: US SBU $ in Millions l Margins declined primarily due to an accrual associated with the 2016 rate order at IPL and reversion to prior ESP rates at DPL in Ohio l Lower Adjusted PTC 1 also reflects as a result of a contract termination in 2016, related to DPL s competitive retail business l Lower Consolidated FCF 1 also reflects higher purchased power and fuel costs at DPL Consolidated FCF 1 Decreased $70; Adjusted PTC 1 Decreased $32 $300 $250 $200 $150 $100 $50 Consolidated FCF 1 $266 $16 $196 $14 Adjusted PTC 1 $143 $111 $ FCF Attributable to NCI A non-gaap financial measure. See definitions. 31

32 Financial Results: Andes SBU $ in Millions l Margins improved due to higher availability in Argentina and higher reservoir levels and generation in Colombia l Higher Consolidated FCF 1 also reflects the non-cash impact on margins from environmental tax accruals and higher depreciation in Chile Consolidated FCF 1 Increased $89; Adjusted PTC 1 Increased $25 $200 $150 $100 $50 Consolidated FCF 1 $97 $37 $186 $65 $145 Adjusted PTC 1 $170 $ FCF Attributable to NCI A non-gaap financial measure. See definitions. 32

33 Financial Results: Brazil SBU $ in Millions l Margins improved due to higher spot sales at Tietê, and higher tariffs at Eletropaulo Consolidated FCF 1 Decreased $156; Adjusted PTC 1 Increased $40 l Higher Adjusted PTC 1 also reflects the successful settlement of a legal dispute at Uruguaiana l Lower Consolidated FCF 1 also reflects the impact from the recovery of high purchased power costs in 2016 at Eletropaulo $400 $350 $300 $250 $200 $150 $100 $50 $0 Consolidated FCF 1 $321 $ $165 $ Adjusted PTC 1 $ $ FCF Attributable to NCI 1 1. A non-gaap financial measure. See definitions. 33

34 Financial Results: MCAC SBU $ in Millions l Margins improved primarily due to higher availability in Mexico and higher energy sales in the Dominican Republic l Higher Consolidated FCF 1 also reflects lower working capital requirements in the Dominican Republic and Puerto Rico, primarily related to the timing of collections and fuel payments Consolidated FCF 1 Increased $80; Adjusted PTC 1 Increased $35 $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Consolidated FCF 1 $13 $ $93 $ Adjusted PTC 1 $ $ FCF Attributable to NCI 1 1. A non-gaap financial measure. See definitions. 34

35 Financial Results: Europe SBU $ in Millions l Margins improved primarily due to higher capacity margins in the United Kingdom Consolidated FCF 1 Decreased $288; Adjusted PTC 1 Increased $6 l Lower Consolidated FCF 1 also reflects the collection of overdue receivables at Maritza in Bulgaria in 2016 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Consolidated FCF 1 $433 $ $145 $20 $103 $ FCF Attributable to NCI Adjusted PTC A non-gaap financial measure. See definitions. 35

36 Financial Results: Asia SBU $ in Millions l Margins were flat l Higher Consolidated FCF 1 reflects lower working capital requirements at Masinloc in the Philippines due to the timing of fuel payments Consolidated FCF 1 Increased $9; Adjusted PTC 1 Flat $160 $140 $120 $100 $80 $60 $40 Consolidated FCF 1 $125 $63 $134 $69 Adjusted PTC 1 $48 $48 $20 $ FCF Attributable to NCI 1 1. A non-gaap financial measure. See definitions. 36

37 Q Adjusted PTC 1 : Reconciliation to Public Financials of Listed Subsidiaries & Public Filers This table provides financial data of those operating subsidiaries of AES that are publicly listed or have publicly filed financial information on a stand-alone basis. The table provides a reconciliation of the subsidiary s Adjusted PTC as it is included in AES consolidated Adjusted PTC with the subsidiary s income/(loss) from continuing operations under US GAAP and the subsidiary s locally IFRS reported net income, if applicable. Readers should consult the subsidiary s publicly filed reports for further details of such subsidiary s results of operations. $ in Millions AES SBU/Reporting Country US Andes/Chile Brazil US GAAP RECONCILIATION AES Company IPL DPL AES Gener 2 Eletropaulo 2 Tietê 2 Q Q Q AES Business Unit Adjusted Earnings 1,3 $15 $21 $5 $4 $32 $48 $1 ($2) $8 $7 Adjusted PTC 1,3 Public Filer (Stand-alone) $23 $31 $8 $7 $54 $72 $2 ($2) $12 $10 Impact of AES Differences from Public Filings $ AES Business Unit Adjusted PTC 1 $23 $31 $8 $8 $54 $72 $2 ($2) $12 $10 Unrealized Derivatives (Losses)/Gains - - $2 $4 ($10) $ Unrealized Foreign Currency Transaction Losses $1 Impairment Losses ($235) Disposition/Acquisition Gains - - ($1) Loss on Extinguishment of Debt ($2) $3 - - ($1) - Non-Controlling Interest before Tax $12 $ $24 $36 $11 ($9) $36 $36 Income Tax Benefit/(Expenses) ($11) ($14) ($8) $87 ($25) ($38) ($5) $3 ($14) ($15) US GAAP Income/(Loss) from Continuing Operations 4 $24 $30 $1 ($136) $41 $74 $8 ($8) $33 $32 Adjustment to Depreciation & Amortization 5 ($10) ($10) ($7) ($7) ($3) ($3) Adjustment to Regulatory Liabilities & Assets Adjustment to Taxes 6 ($3) $8 ($2) ($5) - $1 Other Adjustments $16 ($6) $10 $22 ($2) ($1) IFRS Net Income $44 $66 $9 $2 $28 $29 BRL-USD Implied Exchange Rate Q Q Q Q Q Q Q A non-gaap financial measure. Reconciliation provided above. See definitions for descriptions of adjustments. 2. The listed subsidiary is a public filer in its home country and reports its financial results locally under IFRS. Accordingly certain adjustments presented under IFRS Reconciliation are required to account for differences between US GAAP and local IFRS standards. 3. Total Adjusted PTC, US GAAP Income from continuing operations and intervening adjustments are calculated before the elimination of inter-segment transactions such as revenue and expenses related to the transfer of electricity from AES generation plants to AES utilities within Brazil. 4. Represents the income/(loss) from continuing operations of the subsidiary included in the consolidated operating results of AES under US GAAP. 5. Adjustment to depreciation and amortization expense represents additional expense required due primarily to basis differences of long-lived and intangible assets under IFRS for each reporting period. 6. Adjustment to taxes represents mainly differences relating to the goodwill tax benefit resulting from the restructuring of Brazilian subsidiaries that increased tax basis in long-term assets (Eletropaulo) and depreciation for the difference in cost basis of PP&E (Eletropaulo and Tietê). 37

38 Q Modeling Disclosures $ in Millions Adjusted PTC 1 Consolidated Interest Expense Interest Income Depreciation & Amortization Attributable to NCI Ownership- Adjusted Consolidated Attributable to NCI Ownership- Adjusted Consolidated Attributable to NCI Ownership- Adjusted US $63 $62 ($8) $ $109 ($15) $94 DPL $8 $27 - $ $26 - $26 IPL $23 $25 ($7) $ $51 ($15) $36 Andes $82 $52 ($17) $35 $12 ($1) $11 $62 ($23) $39 AES Gener $54 $44 ($17) $27 $2 ($1) $1 $60 ($23) $37 Brazil $13 $68 ($55) $13 $43 ($34) $9 $43 ($35) $8 Tietê $12 $10 ($8) $2 $6 ($5) $1 $10 ($8) $2 Eletropaulo $2 $56 ($47) $9 $34 ($29) $5 $33 ($27) $6 MCAC $99 $41 ($7) $34 $5 ($1) $4 $43 ($10) $33 Europe $54 $15 ($4) $ $23 ($4) $19 Asia $26 $26 ($13) $13 $32 ($16) $16 $7 ($3) $4 Subtotal $337 $264 ($104) $160 $92 ($52) $40 $287 ($90) $197 Corp/Other ($94) $69 - $69 $1 - $1 $3 - $3 TOTAL $243 $333 ($104) $229 $93 ($52) $41 $290 ($90) $ A non-gaap financial measure. See reconciliation to the nearest GAAP measure on Slide 52 and definitions. 38

39 Q Modeling Disclosures $ in Millions Total Debt Cash & Cash Equivalents, Restricted Cash, Short-Term Investments, Debt Service Reserves & Other Deposits Consolidated Attributable to NCI Ownership-Adjusted Consolidated Attributable to NCI Ownership-Adjusted US $5,215 ($784) $4,431 $273 ($9) $264 DPL $1,838 - $1,838 $36 - $36 IPL $2,609 ($782) $1,827 $29 ($8) $21 Andes $4,200 ($1,565) $2,635 $472 ($150) $322 AES Gener $3,871 ($1,564) $2,307 $356 ($150) $206 Brazil 1 $1,743 ($1,396) $347 $1,049 ($783) $266 Tietê $722 ($547) $175 $480 ($363) $117 Eletropaulo $1,021 ($849) $172 $445 ($370) $75 MCAC $2,625 ($452) $2,173 $419 ($77) $342 Europe $935 ($243) $692 $185 ($41) $144 Asia $1,669 ($818) $851 $197 ($94) $103 Subtotal $16,387 ($5,258) $11,129 $2,595 ($1,154) $1,441 Corp/Other $4,384 - $4,384 $249 - $249 TOTAL $20,771 ($5,258) $15,513 $2,844 ($1,154) $1, In addition to total debt, Eletropaulo has $1,124 million of pension plan liabilities. AES owns 17% of Eletropaulo. 39

40 DPL Inc. Modeling Disclosures Based on Market Conditions and Hedged Position as of June 30, 2017 Balance of Year 2017 Full Year 2018 Full Year 2019 Volume Production (TWh) % Volume Hedged ~47% ~24% ~11% Average Hedged Dark Spread ($/MWh) $13.59 $17.41 N/A EBITDA Generation Business 1 ($ in Millions) EBITDA DPL Inc. including Generation and T&D ($ in Millions) Reference Prices 2 ~$45 to $50 per year ~$275 to $300 per year Henry Hub Natural Gas ($/mmbtu) $3.07 $2.99 $2.85 AEP-Dayton Hub ATC Prices ($/MWh) $29 $30 $29 EBITDA Sensitivities (with Existing Hedges) ($ in Millions) +10% AD Hub Energy Price ATC ($/MWh) $5 $13 $7-10% AD Hub Energy Price ATC ($/MWh) ($5) ($10) ($6) Note: Data assume the exit of Stuart and Killen mid-2018, Miami Fort and Zimmer mid-2017, and Conesville in early Includes capacity premium performance results. 2. Balance of Year 2017 (July-December) and Full Year based on forward curves as of June 30,

41 Non-Recourse Debt at DP&L and DPL Inc. $ in Millions Series Interest Rate Maturity Amount Outstanding as of June 30, 2017 Amount Outstanding as of August 7, 2017 Remarks 2016 FMB Secured B Loan Variable Aug $442.8 $442.8 Redeemable at 101% of par 2006 OH Air Quality PCBs 4.8% Sept $91.9 $70.0 Redeemable at par on any day 2015 Direct Purchase Tax Exempt TL Variable Aug (put) Total Pollution Control Various Various $291.9 $270.0 $200.0 $200.0 Redeemable at par on any day Wright-Patterson AFB Note 4.2% Feb $17.9 $17.9 No redemption option 2015 DP&L Revolver Variable July Total DP&L $752.6 $730.7 Redeemable at par on any day 2018 Term Loan Variable May 2018 $112.5 $112.5 No redemption penalty 2019 Senior Unsecured 6.75% Oct $200.0 $200.0 Callable at make-whole T Senior Unsecured 7.25% Oct $780.0 $780.0 Callable at make-whole T+50 Total Senior Unsecured Bonds Various Various $980.0 $ DPL Revolver Variable July Redeemable at par on any day 2001 Cap Trust II Securities 8.125% Sept $15.6 $15.6 Callable at make-whole T+25 Total DPL Inc. $1,108.1 $1,108.1 TOTAL $1,860.7 $1,

42 Parent Sources and Uses of Liquidity $ in Millions Q Sources Total Subsidiary Distributions 1 $375 $337 $584 $422 Proceeds from Asset Sales, Net $35 $42 $324 $53 Financing Proceeds, Net $519 $495 $519 $495 Increased/(Decreased) Credit Facility Commitments $300 - $300 - Issuance of Common Stock, Net Total Returns of Capital Distributions & Project Financing Proceeds $66 $14 $66 $31 Beginning Parent Company Liquidity 2 $719 $675 $894 $1,137 TOTAL SOURCES $2,014 $1,563 $2,687 $2,138 Uses Repayments of Debt ($519) ($495) ($860) ($611) Shareholder Dividend ($79) ($72) ($158) ($145) Repurchase of Equity ($79) Investments in Subsidiaries, Net ($84) ($109) ($144) ($248) Cash for Development, Selling, General & Administrative and Taxes ($54) ($70) ($173) ($154) Cash Payments for Interest ($86) ($78) ($160) ($152) Changes in Letters of Credit and Other, Net $28 $24 $28 $14 Ending Parent Company Liquidity 2 ($1,220) ($763) ($1,220) ($763) TOTAL USES ($2,014) ($1,563) ($2,687) ($2,138) 1. See definitions. 2. A non-gaap financial measure. See definitions. 42

43 Q Subsidiary Distributions 1 $ in Millions Subsidiary Distributions 1 by SBU Q US $137 $156 Andes $166 $245 Brazil $4 $4 MCAC $16 $16 Europe $24 $130 Asia $24 $25 Corporate & Other 2 $4 $8 TOTAL $375 $ See definitions. 2. Corporate & Other includes Global Insurance. Top Ten Subsidiary Distributions 1 by Business Q Business Amount Business Amount Business Amount Business Amount Gener (Andes) $91 Altai (Europe) $13 US Holdco (US) Argentina (Andes) Argentina (Andes) $154 Mong Duong (Asia) $81 Itabo (MCAC) $9 Gener (Andes) $91 Elsta (Europe) $17 $75 IPALCO (US) $52 Mong Duong (Asia) Maritza (Europe) Andres (MCAC) $8 $6 Maritza (Europe) US Holdco (US) $25 $82 Altai (Europe) $13 $81 Kilroot (Europe) $24 Brazil (Brazil) $4 IPALCO (US) $70 Itabo (MCAC) $9 $12 43

44 Reconciliation of Subsidiary Distributions 1 and Parent Liquidity 2 $ in Millions June 30, 2017 March 31, 2017 Quarter Ended December 31, 2016 September 30, 2016 Total Subsidiary Distributions 1 to Parent & QHCs 3 $375 $209 $426 $265 Total Return of Capital Distributions to Parent & QHCs 3 $66 - $12 $4 Total Subsidiary Distributions 1 & Returns of Capital to Parent $441 $209 $438 $269 June 30, 2017 March 31, 2017 Balance as of December 31, 2016 September 30, 2016 Cash at Parent & QHCs 3 $127 $52 $100 $42 Availability Under Credit Facilities $1,093 $667 $794 $519 Ending Liquidity $1,220 $719 $894 $ See definitions. 2. A non-gaap financial measure. See definitions. 3. Qualified Holding Company. See assumptions. 44

45 2017 Guidance Estimated Sensitivities Interest Rates 1 l 100 bps move in interest rates over year-to-go 2017 is forecasted to have a change in EPS of approximately $ % appreciation in USD against the following key currencies is forecasted to have the following negative EPS impacts: Average Rate Balance of Year 2017 Sensitivity Currencies Brazilian Real (BRL) 3.38 Less than $0.005 Colombian Peso (COP) 3,089 Less than $0.005 Euro (EUR) 1.15 Less than $0.005 Great British Pound (GBP) 1.31 Less than $0.005 Kazakhstan Tenge (KZT) 341 Less than $ % increase in commodity prices is forecasted to have the following EPS impacts: Average Rate Balance of Year 2017 Sensitivity Commodity Sensitivity Illinois Basin Coal $34/ton Rotterdam Coal (API 2) $78/ton Less than $0.005, negative correlation NYMEX WTI Crude Oil $46/bbl IPE Brent Crude Oil $49/bbl Less than $0.005, positive correlation NYMEX Henry Hub Natural Gas $3.1/mmbtu UK National Balancing Point Natural Gas 0.4/therm Less than $0.005, negative correlation US Power (DPL) PJM AD Hub $ 29/MWh $0.005, positive correlation Note: Guidance provided on August 8, Sensitivities are provided on a standalone basis, assuming no change in the other factors, to illustrate the magnitude and direction of changing market factors on AES results. Estimates show the impact on year-to-go 2017 Adjusted EPS. Actual results may differ from the sensitivities provided due to execution of risk management strategies, local market dynamics and operational factors. Full year 2017 guidance is based on currency and commodity forward curves and forecasts as of June 30, There are inherent uncertainties in the forecasting process and actual results may differ from projections. The Company undertakes no obligation to update the guidance presented. Please see Item 1 of the Form 10-Q for a more complete discussion of this topic. AES has exposure to multiple coal, oil, and natural gas, and power indices; forward curves are provided for representative liquid markets. Sensitivities are rounded to the nearest $0.005 cent per share. 1. The move is applied to the floating interest rate portfolio balances as of June 30,

46 2017 Foreign Exchange (FX) Risk Mitigated Through Structuring of Our Businesses and Active Hedging 2017 Adjusted PTC 1 by Currency Exposure 2017 Full Year FX Sensitivity 2,3 by SBU (Cents Per Share) KZT 1% 2% EUR COP 5% 7% BRL 5% GBP % USD- Equivalent US Andes Brazil MCAC Europe Asia CorTotal FX Risk After Hedges Impact of FX Hedges l l l 2017 correlated FX risk after hedges is $0.015 for 10% USD appreciation 80% of 2017 earnings effectively USD USD-based economies (i.e. U.S., Panama) Structuring of our contracts FX risk mitigated on a rolling basis by shorter-term active FX hedging programs 1. Before Corporate Charges. A non-gaap financial measure. See definitions. 2. Sensitivity represents full year 2017 exposure to a 10% appreciation of USD relative to foreign currency as of December 31, Andes includes Argentina and Colombia businesses only due to limited translational impact of USD appreciation to Chilean businesses. 46

47 Commodity Exposure is Mostly Hedged in the Medium- to Long- Term Full Year 2019 Adjusted EPS 1 Commodity Sensitivity 2 for 10% Change in Commodity Prices Cents Per Share Coal Gas Oil DPL Power (2.0) 1. A non-gaap financial measure. See definitions. 2. Domestic and International sensitivities are combined and assumes each fuel category moves 10%. Adjusted EPS is negatively correlated to coal price movement, and positively correlated to gas, oil and power price movements. 47

48 AES Modeling Disclosures $ in Millions Parent Company Cash Flow Assumptions 2017 Subsidiary Distributions (a) $1,150-$1,265 Cash Interest (b) $285-$300 Corporate Overhead $150 Parent-Funded SBU Overhead $100 Business Development $40 Cash for Development, General & Administrative and Tax (c) $290 PARENT FREE CASH FLOW 1 (a b c) $575-$ A non-gaap financial measure. See definitions. 48

49 Attractive Returns from Construction Pipeline $ in Millions, Unless Otherwise Stated Project Country AES Ownership Fuel Gross MW Expected COD Total Capex Total AES Equity ROE Comments Construction Projects Coming On-Line IPL Wastewater US-IN 70% Coal 2H 2017 $224 $71 Environmental (NPDES) upgrades of 1,864 MW Eagle Valley CCGT US-IN 70% Gas 671 1H 2018 $613 $193 Colón Panama 50% Gas 380 1H 2018 $996 $205 Regasification and LNG storage tank expected on-line in 2019 OPGC 2 India 49% Coal 1,320 2H 2018 $1,585 $227 Alto Maipo Chile 62% Hydro 531 1H 2019 $2,513 $413 Masinloc 2 Philippines 51% Coal 335 1H 2019 $740 $110 Southland Repowering US-CA 100% Gas 1,284 1H 2020 $2,314 $350 Total 4,621 $8,984 $1,568 ROE 1 ~12% CASH YIELD 1 ~13% Weighted average; net income divided by AES equity contribution Weighted average; subsidiary distributions divided by AES equity contribution 1. Based on projections. See our 2016 Form 10-K for further discussion of development and construction risks. Based on 3-year average contributions from all projects under construction and IPL wastewater upgrades, once all projects under construction are completed. 49

50 Reconciliation of Q2 and Capex and Free Cash Flow 1 $ in Millions Q Operational Capex (a) $142 $158 $294 $320 Environmental Capex (b) $15 $68 $39 $155 Maintenance Capex (a + b) $157 $226 $333 $475 Growth Capex (c) $527 $466 $851 $867 TOTAL CAPEX 2 (a + b + c) $684 $692 $1,184 $1,342 Q Operating Cash Flow $251 $723 $954 $1,363 Add: Capital Expenditures Related to Service Concession Assets Less: Maintenance Capex, net of Reinsurance Proceeds and Non- Recoverable Environmental Capex $1 $2 $2 $26 ($146) ($171) ($304) ($345) CONSOLIDATED FREE CASH FLOW 1 $106 $554 $652 $1, A non-gaap financial measure as reconciled above. See definitions. 2. Includes capital expenditures under investing and financing activities. 50

51 Reconciliation of Q2 Adjusted PTC 1 and Adjusted EPS 1 $ in Millions, Except Per Share Amounts Income (Loss) from Continuing Operations Attributable to AES and Diluted EPS Add: Income Tax Benefit from Continuing Operations Attributable to AES Net of NCI 2 Q Q Per Share (Diluted) Net of NCI 2 Net of NCI 2 Per Share (Diluted) Net of NCI 2 $53 $0.08 ($103) ($0.16) $53 ($42) Pre-Tax Contribution $106 ($145) Adjustments Unrealized Derivative Gains $2 - $30 $0.04 Unrealized Foreign Currency Transaction Gains ($24) ($0.03) $17 $0.02 Disposition/Acquisition (Gains) Losses $54 $ $17 $ Impairment Expense $94 $ $235 $ (Gains) Losses on Extinguishment of Debt $11 $ $6 $0.01 Less: Net Income Tax (Benefit) - ($0.04) 8 - ($0.13) 8 ADJUSTED PTC 1 & ADJUSTED EPS 1 $243 $0.25 $160 $ Non-GAAP financial measures. See definitions. 2. NCI is defined as Noncontrolling Interests. 3. Amount primarily relates to loss on sale of Kazakhstan CHPs of $48 million, or $0.07 per share. 4. Amount primarily relates to the loss from the deconsolidation of UK Wind of $20 million, or $0.03 per share. 5. Amount primarily relates to asset impairments at Kazakhstan hydroelectric plants of $90 million, or $0.14 per share. 6. Amount primarily relates to the asset impairment at DPL of $235 million, or $0.36 per share. 7. Amount primarily relates to the loss on early retirement of debt at the Parent Company of $6 million, or $0.01 per share. 8. Amount primarily relates to the income tax benefit associated with asset impairment losses of $30 million, or $0.05 per share and $70 million, or $0.11 per share in the three months ended June 30, 2017 and 2016, respectively. 51

52 Reconciliation of Adjusted PTC 1 and Adjusted EPS 1 $ in Millions, Except Per Share Amounts Income (Loss) from Continuing Operations Attributable to AES and Diluted EPS Add: Income Tax Benefit from Continuing Operations Attributable to AES Net of NCI Per Share (Diluted) Net of NCI 2 Net of NCI 2 Per Share (Diluted) Net of NCI 2 $29 $0.04 $32 $0.05 $73 $19 Pre-Tax Contribution $102 $51 Adjustments Unrealized Derivative Gains $1 - ($4) - Unrealized Foreign Currency Transaction Gains ($33) ($0.04) $9 - Disposition/Acquisition (Gains) Losses $106 $ ($2) - Impairment Expense $262 $ $285 $ (Gains) Losses on Extinguishment of Debt ($5) ($0.01) 6 $6 $0.01 Less: Net Income Tax (Benefit) - ($0.13) 7 - ($0.17) 7 ADJUSTED PTC 1 & ADJUSTED EPS 1 $433 $0.42 $345 $ Non-GAAP financial measures. See definitions. 2. NCI is defined as Noncontrolling Interests. 3. Amount primarily relates to loss on sale of Kazakhstan CHPs of $48 million, or $0.07 per share, realized derivative losses associated with the sale of Sul of $38 million, or $0.06 per share; costs associated with early plant closure of DPL of $20 million, or $0.03 per share. 4. Amount primarily relates to asset impairment at Kazakhstan hydroelectric plants of $90 million, or $0.14 per share, at Kazakhstan CHPs of $94 million, or $0.14 per share, and DPL of $66 million, or $0.10 per share. 5. Amount primarily relates to asset impairment at DPL of $235 million, or $0.36 per share; and Buffalo Gap II of $159 million ($49 million, or $0.07 per share, net of NCI). 6. Amount primarily relates to the gain on early retirement of debt at Alicura of $65 million, or $0.10 per share, partially offset by the loss on early retirement of debt at the Parent Company of $53 million, or $0.08 per share. 7. Amount primarily relates to the income tax benefit associated with asset impairment losses of $81 million, or $0.12 per share and $122 million, or $0.18 per share in the six months ended June 30, 2017 and 2016, respectively. 52

53 Reconciliation of 2016 Guidance $ in Millions, Except Per Share Amounts Consolidated Net Cash Provided by Operating Activities 2016 Guidance $2,000-$2,900 Adjusted EPS 1,2 $0.95-$1.05 Consolidated Net Cash Provided by Operating Activities (a) Maintenance & Environmental Capital Expenditures (b) Reconciliation $2,000-$2,900 $600-$800 Consolidated Free Cash Flow 1 (a - b) $1,300-$2,200 l Commodity and foreign currency exchange rates and forward curves as of September 30, A non-gaap financial measure. See definitions. 2. Actual 2017 Adjusted EPS was $0.98. The above range is provided as a base for future growth rates. Reconciliation of Adjusted EPS may be found in the Company s 2016 Form 10-K. 53

54 Reconciliation of 2017 Guidance $ in Millions, Except Per Share Amounts Consolidated Net Cash Provided by Operating Activities 2017 Guidance $2,000-$2,800 Consolidated Free Cash Flow 1 $1,400-$2,000 Adjusted EPS 1, 2 $1.00-$1.10 Consolidated Net Cash Provided by Operating Activities (a) Maintenance & Environmental Capital Expenditures (b) Reconciliation $2,000-$2,800 $600-$800 Consolidated Free Cash Flow 1 (a - b) $1,400-$2,000 l Commodity and foreign currency exchange rates and forward curves as of June 30, A non-gaap financial measure. See definitions. 2. The Company is not able to provide a corresponding GAAP equivalent for its Adjusted EPS guidance. In providing its full year 2017 Adjusted EPS guidance, the Company notes that there could be differences between expected reported earnings and estimated operating earnings, including the items listed below. Therefore, management is not able to estimate the aggregate impact, if any, of these items on reported earnings. As of June 30, 2017, the impact of these items was as follows: (a) unrealized gains or losses related to derivative transactions represent a loss of $1 million, (b) unrealized foreign currency gains or losses represent a gain of $17 million, (c) gains or losses and associated benefits and costs due to dispositions and acquisitions of business interests, including early plant closures, and the tax impact from the repatriation of sales proceeds represent a loss of $87 million, (d) losses due to impairments of $181 million and (e) gains, losses and costs due to the early retirement of debt represent a gain of $3 million. 54

55 Assumptions Forecasted financial information is based on certain material assumptions. Such assumptions include, but are not limited to: (a) no unforeseen external events such as wars, depressions, or economic or political disruptions occur; (b) businesses continue to operate in a manner consistent with or better than prior operating performance, including achievement of planned productivity improvements including benefits of global sourcing, and in accordance with the provisions of their relevant contracts or concessions; (c) new business opportunities are available to AES in sufficient quantity to achieve its growth objectives; (d) no material disruptions or discontinuities occur in the Gross Domestic Product (GDP), foreign exchange rates, inflation or interest rates during the forecast period; and (e) material businessspecific risks as described in the Company s SEC filings do not occur individually or cumulatively. In addition, benefits from global sourcing include avoided costs, reduction in capital project costs versus budgetary estimates, and projected savings based on assumed spend volume which may or may not actually be achieved. Also, improvement in certain Key Performance Indicators (KPIs) such as equivalent forced outage rate and commercial availability may not improve financial performance at all facilities based on commercial terms and conditions. These benefits will not be fully reflected in the Company s consolidated financial results. The cash held at qualified holding companies ( QHCs ) represents cash sent to subsidiaries of the Company domiciled outside of the U.S. Such subsidiaries had no contractual restrictions on their ability to send cash to AES, the Parent Company, however, cash held at qualified holding companies does not reflect the impact of any tax liabilities that may result from any such cash being repatriated to the Parent Company in the U.S. Cash at those subsidiaries was used for investment and related activities outside of the U.S. These investments included equity investments and loans to other foreign subsidiaries as well as development and general costs and expenses incurred outside the U.S. Since the cash held by these QHCs is available to the Parent, AES uses the combined measure of subsidiary distributions to Parent and QHCs as a useful measure of cash available to the Parent to meet its international liquidity needs. AES believes that unconsolidated parent company liquidity is important to the liquidity position of AES as a parent company because of the non-recourse nature of most of AES indebtedness. 55

56 Definitions l l l l l l l Adjusted Earnings Per Share (a non-gaap financial measure) is defined 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 and associated benefits and costs due to dispositions and acquisitions of business interests, including early plant closures, and the tax impact from the repatriation of sales proceeds, (d) losses due to impairments, and (e) gains, losses and costs due to the early retirement of debt. The GAAP measure most comparable to adjusted EPS is diluted earnings per share from continuing operations. We believe that 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. 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. Beginning in the first quarter of 2017, the definition was revised to exclude associated benefits and costs due to acquisitions, dispositions and early plant closures, including the tax impact of decisions made at the time of sale to repatriate proceeds. Adjusted Pre-Tax Contribution (a non-gaap financial measure) is defined 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 and associated benefits and costs due to dispositions and acquisitions of business interests, including early plant closures, and the tax impact from the repatriation of sales proceeds, (d) losses due to impairments, and (e) gains, losses and 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. The GAAP measure most comparable to adjusted PTC is income from continuing operations attributable to AES. We believe that adjusted PTC 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 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. Beginning in the first quarter of 2017, the definition was revised to exclude associated benefits and costs due to acquisitions, dispositions and early plant closures, including the tax impact of decisions made at the time of sale to repatriate proceeds. Free Cash Flow (a non-gaap financial measure) is defined as net cash from operating activities (adjusted for service concession asset capital expenditures) less maintenance capital expenditures (including non-recoverable environmental capital expenditures), net of reinsurance proceeds from third parties. AES believes that free cash flow is a useful measure for evaluating our financial condition because it represents the amount of cash generated by the business after the funding of maintenance capital expenditures that may be available for investing in growth opportunities or for repaying debt. Free cash flow should not be construed as an alternative to net cash from operating activities, which is determined in accordance with GAAP. Parent Company Liquidity (a non-gaap financial measure) is defined as cash at the Parent Company plus availability under corporate credit facilities plus cash at qualified holding companies ( QHCs ). AES believes that unconsolidated Parent Company liquidity is important to the liquidity position of AES as a Parent Company because of the non-recourse nature of most of AES indebtedness. Parent Free Cash Flow (a non-gaap financial measure) should not be construed as an alternative to Net Cash Provided by Operating Activities which is determined in accordance with GAAP. Parent Free Cash Flow is equal to Subsidiary Distributions less cash used for interest costs, development, general and administrative activities, and tax payments by the Parent Company. Parent Free Cash Flow is used for dividends, share repurchases, growth investments, recourse debt repayments, and other uses by the Parent Company. Subsidiary Liquidity (a non-gaap financial measure) is defined as cash and cash equivalents and bank lines of credit at various subsidiaries. Subsidiary Distributions should not be construed as an alternative 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 holding company that does not derive any significant direct revenues from its own activities but instead relies on its subsidiaries business activities and the resultant distributions to fund the debt service, investment and other cash needs of the holding company. The reconciliation 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 include, but are not limited to, retention of cash to fund capital expenditures at the subsidiary, cash retention associated with non-recourse debt covenant restrictions and related debt service requirements at the subsidiaries, retention of cash related to sufficiency of local GAAP statutory retained earnings at the subsidiaries, retention of cash for working capital needs at the subsidiaries, and other similar timing differences between when the cash is generated at the subsidiaries and when it reaches the Parent Company and related holding companies. 56