AES Corp. The Reports Operating Results (10-K)

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Feb 27, 2012
AES Corp. The (AES, Financial) filed Annual Report for the period ended 2011-12-31.

Aes Corp has a market cap of $10.59 billion; its shares were traded at around $13.8 with a P/E ratio of 14.23 and P/S ratio of 0.64.

Highlight of Business Operations:

Our North America operations accounted for 16%, 16% and 19% of consolidated revenue in 2011, 2010 and 2009, respectively. The following table provides highlights of our North America operations:

Company (DP&L), which it owns through DPL Inc. (DPL), the parent company of DP&L. IPL generates, transmits, distributes and sells electricity to approximately 470,000 customers in the city of Indianapolis and neighboring areas within the state of Indiana. IPL owns and operates four generating stations. Two of the generating stations are primarily coal-fired stations. The third station has a combination of units that use coal (base load capacity) and natural gas and/or oil (peaking capacity) for fuel to produce electricity. The fourth station is a small peaking station that uses gas-fired combustion turbine technology for the production of electricity. IPLs gross electric generation capacity is 3,699 MW. Approximately 45% of IPLs coal is provided by one supplier with which IPL has long-term contracts. A key driver for the business is tariff recovery for environmental projects through the rate adjustment process. IPLs customers include residential, industrial, commercial and all other which made up 33%, 13%, 36% and 6%, respectively, of North America Utilities revenue for 2011. The remaining 12% of North America Utilities revenue is from DPL.

DP&L generates, transmits, distributes and sells electricity to more than 500,000 customers in a 6,000 square mile area of West Central Ohio. DP&L, with certain other Ohio utilities and their affiliates, commonly owns seven coal-fired electric generating facilities and numerous transmission facilities. DP&L also has one wholly-owned coal-fired plant. DP&L is affiliated with DPL Energy, LLC (DPLE) which owns peaking generation units located in Ohio and Indiana. DP&Ls wholly-owned plants and share of the capacity of its jointly-owned plants and DPLEs wholly-owned peaking units aggregates to approximately 3,817 MW. During the period November 28, 2011 through December 31, 2011, approximately 80% of DP&Ls coal was provided by four suppliers and DP&L has long-term contracts with three of them. DP&Ls customers include residential, commercial, industrial and governmental, which make up 67%, 21% and 12%, respectively, of DP&Ls revenue for the period after acquisition in November 2011.

Europe Generation. Our Generation operations in Europe accounted for 9%, 8% and 6% of our consolidated revenue in 2011, 2010 and 2009, respectively. In 2011, our Maritza facility in Bulgaria, a 670 MW coal-fired plant, commenced commercial operations. As a result of the announced sale of 80% of our interest in Cartagena, a 1,199 MW gas-fired plant in Spain, we have classified Cartagena as held for sale on the Consolidated Balance Sheets. AES operates four power plants in Kazakhstan which account for 8% of the countrys total installed generation capacity. In the United Kingdom, we own and operate more than 1,900 MW at the Ballylumford plant and the Kilroot facility. See Note 16Segment and Geographic Information in the Consolidated Financial Statements in Item 8 of this Form 10-K for revenue, Adjusted Gross Margin (a non-GAAP measure) and total assets by segment. Key business drivers of this segment are: foreign currency exchange rates, new legislation and regulations including those related to the environment.

PJM operates an organized forward capacity market known as the Reliability Pricing Model (RPM). Utilities and other load serving entities are required to demonstrate that they have sufficient generation capacity to serve their retail customers or to purchase such capacity in the periodic RPM auctions. The PJM RPM capacity base residual auction for the 2014/2015 period cleared at a per megawatt price of $126/day for the RTO area encompassing DP&L. The per megawatt prices for the periods 2013/2014, 2012/2013, 2011/2012 and 2010/2011 were $28/day, $16/day, $110/day and $174/day, respectively, based on previous auctions. Future RPM auction results will be dependent not only on the overall supply and demand of generation and load, but may also be affected by congestion as well as by PJMs business rules relating to bidding for demand response and energy efficiency resources in the RPM capacity auctions. Increases in customer switching may cause more of the RPM capacity costs and revenues to be excluded from the RPM retail rate rider calculation. DP&L cannot predict the outcome of future auctions or customer switching. Additionally, while the most recent auction price has increased, it still is low relative to the actual costs that would be incurred to construct new generation or invest in substantial amounts of capital for environmental compliance. Future RPM auction results could have a material impact on DP&Ls future results of operations, financial condition and cash flows.

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