Second quarter 2013 Adjusted EPS increased $0.14 to $0.32. A lower effective tax rate represented approximately $0.06 of the increase. Approximately $0.03 of the lower tax rate benefit was anticipated in the Company's guidance, while the remaining $0.03 was related to the quarterly impacts of geographical income mix and benefits related to the resolution of outstanding tax audits during the quarter. Cost reductions and capital allocation decisions, including share repurchases, accounted for $0.03 of the increase. Operating results at the SBUs, as described below, contributed $0.05, net of the unfavorable impact of $0.05 from low hydrology in Latin America.
Table 2: Adjusted PTC 1 by SBU and Adjusted EPS 1
|$ in Millions, Except Per Share Amounts||Second Quarter||Year-to-date June 30,|
|Total AES Adjusted PTC 1,2||$||271||$||206||$||65||$||536||$||619||$||(83||)|
|Adjusted Effective Tax Rate||12||%||37||%||20||%||34||%|
|Diluted Share Count||751||768||750||769|
|Adjusted EPS 1||$||0.32||$||0.18||$||0.14||$||0.58||$||0.55||$||0.03|
|A non-GAAP financial measure. See “Non-GAAP Financial Measures” for definitions and reconciliations to the most comparable GAAP financial measures.|
|2||Includes $2 million and $11 million of after-tax equity in earnings for second quarter 2013 and second quarter 2012, respectively. Includes $6 million and $24 million of after-tax equity in earnings for year-to-date June 30, 2013 and year-to-date June 30, 2012, respectively.|
Second quarter 2013 Adjusted PTC increased $65 million. Key operating drivers of Adjusted PTC included:
- US: An overall decrease of $9 million driven primarily by modest declines at US utilities, due to the impact of customers switching to competitive suppliers and lower capacity prices at DPL and the unfavorable impact of milder weather on retail margin at IPL. In addition, Southland recorded a decline as a result of the temporary restart of operations at Huntington Beach units 3 and 4 in 2012 and these units did not run in 2013. An increase of Adjusted PTC from wind generation facilities partially offset these declines.
- Andes: An overall increase of $36 million driven by the contributions of Ventanas IV, a 270 MW coal-fired plant that commenced operations in March 2013, and higher availability in Chile. This was partially offset by lower volumes due to low water inflows in Colombia and Chile.
- Brazil: An overall increase of $23 million due to the favorable reversal of a liability at Uruguaiana after a decision by an arbitration panel. The Adjusted EPS impact of the favorable reversal of the liability was approximately $0.03. A higher tariff at Eletropaulo, as a result of the tariff reset provision recorded in second quarter 2012, was largely offset by the impact of the April 2013 tariff reset at Sul, as anticipated.
- MCAC: An overall increase of $10 million as a result of higher spot sales in the Dominican Republic and higher tariffs in El Salvador. This was partially offset by a decline in Panama, due to reduced volumes as a result of low water inflows.
- EMEA: An overall increase of $7 million due to improved margins at generation facilities in the United Kingdom, partially offset by a decline in Turkey due to a loss on an embedded foreign currency derivative of approximately $0.02, which is not excluded from Adjusted EPS because the business is an equity method investment.
- Asia: An overall decrease of $15 million, due primarily to lower spot prices and lower contract prices at the Masinloc facility in the Philippines, as the plant signed a 7-year contract to reduce merchant exposure.
- Corp/Other: A favorable decrease of $13 million due to reduced general and administrative expense.
For the six months ended June 30, 2013, Adjusted PTC decreased $83 million. Key operating drivers of Adjusted PTC included:
- US: An overall increase of $33 million primarily due to the favorable impact of the termination of the PPA at Beaver Valley. This was partially offset by a decline at Hawaii, as a result of higher outages and related fixed costs.
- Andes: An overall increase of $5 million driven by the contribution from Ventanas IV, as described above, and higher availability in Chile, which was partially offset by lower dispatch of gas-fired generation in Chile and the impact of lower water inflows in Colombia.
- Brazil: An overall decrease of $43 million driven by a decline at Sul as a result of lower demand, as well as the impact of the April 2013 tariff reset, as anticipated. In addition, lower volumes and higher purchased energy costs due to low water inflows resulted in a decline at Tietê. These declines were partially offset by a favorable reversal of a liability at Uruguaiana after a decision by an arbitration panel and higher tariffs at Eletropaulo, as described above.
- MCAC: An overall decrease of $11 million, driven by low volumes and higher purchased energy costs in Panama, due to low water inflows, partially offset by higher spot sales in the Dominican Republic and a higher tariff in El Salvador.
- EMEA: An overall decrease of $89 million, due primarily to a favorable one-time arbitration settlement at Cartagena in Spain in first quarter 2012 and a decline at Ballylumford in the United Kingdom, driven by a reduction in contracted capacity prices.
- Asia: An overall decrease of $16 million, due primarily to lower prices and lower spot sales at the Masinloc facility in the Philippines, as the plant signed a 7-year contract to reduce merchant exposure.
- Corp/Other: A favorable decrease of $38 million as a result of lower general and administrative expenses.
For the six months ended June 30, 2013, Adjusted EPS increased $0.03 to $0.58. Adjusted PTC declined as described above, but Adjusted EPS increased as a result of a lower effective tax rate and a lower share count. The impact of low hydrology in Latin America was $0.08 for the first half of 2013.