The Aes Corporation  (AES)
Other Ticker:  
    Sector  Utilities    Industry Electric Utilities
   Industry Electric Utilities
   Sector  Utilities

The Aes Corporation Segments

Contract Generation
   63.56 % of total Revenue
Large utilities
   36.44 % of total Revenue

Business Segments (Sep. 30, 2015)
(in millions $)
III. Quarter
(of total Revenues)
(Sep. 30, 2015)
(in millions $)
III. Quarter
(Profit Margin)
Contract Generation
2,367.00 63.56 % 367.00 15.5 %
Large utilities
1,357.00 36.44 % 68.00 5.01 %
3,724.00 100 % 435.00 11.68 %

• View Income Statement • View Competition by Segment • View Annual Report

Growth rates by Segment (Sep. 30, 2015)
Y/Y Revenue
III. Quarter
Q/Q Revenue
(Sep. 30, 2015)
Y/Y Income
III. Quarter
Q/Q Income
Contract Generation
-6.22 % 5.25 % -8.71 % 34.43 %
Large utilities
-29.29 % -15.92 % -13.92 % -17.07 %
-16.18 % -3.6 % -9.56 % 22.54 %

• View Growth rates • View Competitors Segment Growth • View Market Share

To get more information on The Aes's Contract Generation, Large utilities, Total segment. Select each division with the arrow.

  The Aes's

Business Segments Description

Operating Segments

We operate in four business segments: contract generation, competitive supply, large utilities and growth distribution.

Contract Generation

Our contract generation line of business is comprised of generation facilities that have contractually limited their exposure to commodity price risks, primarily electricity price volatility, by entering into longer term (originally five years or longer) power sales agreements for 75% or more of their output capacity. These power sales agreements are typically entered into with one major wholesale customer, but also may involve a series of unrelated customers. These facilities are better able to manage their expenses because they have contracted buyers for a majority of their anticipated output. They can project their fuel supply requirements and generally enter into long-term agreements for most of their fuel supply requirements, thereby limiting their exposure to short-term fuel price volatility. In addition, these facilities may enter into tolling or "pass through" arrangements in which the counter-party directly assumes the risks associated with providing the necessary fuel and then markets the generated power. Through these types of contractual agreements, our contract generation businesses generally produce more predictable cash flows and earnings. The degree of predictability varies from business to business based on the degree to which their exposure is limited by the contracts they have negotiated with their buyers.

Our contract generation segment is comprised of our interests in 61 power generating facilities totaling over 18 gigawatts of capacity located in 18 countries. It also includes minority interests in 7 power generation facilities totaling over 4 gigawatts of capacity. Of the total 22 gigawatts of current operating capacity, 29% is derived from coal-fired facilities, 8% from oil-fired facilities, 49% from gas-fired facilities, 13% from hydro facilities and 1% from biomass facilities.

In most of our contract generating businesses, a single customer contracts for most or all of a particular facility's generated power. To reduce the resulting counter-party credit risk, we seek to contract with customers who have investment grade debt ratings, including regulated utilities that are regulated by state or local public utility commissions ("PUCs") which tend to have stable cash flows. We also may obtain sovereign government guarantees of the customer's obligations. However, we do not limit our business solely to customers with investment grade debt ratings or to those countries with investment grade sovereign credit ratings. We believe that locating our plants in different geographic areas helps to mitigate the effects of regional economic downturns, thereby offsetting some of the risks associated with operating in less developed countries.

Competitive Supply

The facilities in our competitive supply segment sell electricity directly to wholesale customers in competitive markets. In contrast to the contract generation segment discussed above, these facilities generally sell less than 75% of their output under long-term contracts. They often sell into power pools under shorter-term contracts or into daily spot markets. The prices these facilities sell under short-term contracts and in the spot electricity markets are unpredictable and can be volatile. In addition, our operational results in this segment are more sensitive to the impact of market fluctuations in the price, natural gas, coal, oil and other fuels. These businesses also have more significant needs for working capital or credit to support their operations.

Large Utilities

Our large utility segment consists of electric utilities that are of significant size and maintain a monopoly franchise within a defined service area. In most cases our large utilities combine generation, transmission and distribution capabilities. Currently, this segment is comprised of three utilities: IPALCO Enterprises, Inc. ("IPALCO"), Eletropaulo, and EDC. We have a 100% common equity interest in IPALCO, a 70% common equity interest in Eletropaulo (50.01% after the January 2004 restructuring) and an 86% common equity interest in EDC. Our large utilities aggregate 5,854 gross MW of generation capacity and serve over 6.5 million customers with annual sales of nearly 58,900 gigawatt hours. Our large utilities are subject to extensive local, state and national regulation relating to ownership, marketing, delivery and pricing of electricity and gas with a focus on protecting customers. Large utility revenues result primarily from retail electricity sales to customers under regulated tariff or concession agreements and to a lesser extent from contractual agreements of varying lengths and provisions.

IPALCO is a holding company and its principal subsidiary is Indianapolis Power  & Light Company ("IPL"). IPL is engaged in generating, transmitting, distributing and selling electric energy to approximately 450,000 customers in the City of Indianapolis and neighboring areas within the state of Indiana. IPL owns and operates four generation facilities. Two generating facilities are primarily coal-fired plants. The third facility has a combination of units that use coal (base load capacity) and natural gas and/or oil (peaking capacity). The fourth facility is a small peaking station that uses gas-fired combustion turbine technology. IPL's net generation winter capability is 3,356 MW and net summer capability is 3,238 MW. We acquired IPALCO in March 2001. In connection with our acquisition of IPALCO, we were required under the U.S. Public Utility Holding Company Act ("PUHCA") to dispose of our 100% ownership interest in CILCORP, a utility holding company whose largest subsidiary is Central Illinois Light Company ("CILCO"), also a regulated utility.

Eletropaulo has served the São Paulo, Brazil area for over 100 years and is the largest electricity distribution company in Latin America in terms of revenues. Eletropaulo's concession contract with the Brazilian National Electric Energy Agency ("ANEEL"), the government agency responsible for regulating the Brazilian electric industry, entitles Eletropaulo to distribute electricity in its service area for 30 years. Eletropaulo's service territory consists of 24 municipalities in the greater São Paulo metropolitan area and adjacent regions that account for approximately 15% of Brazil's GDP, covering 5.0 million customers or 44% of the population in the State of São Paulo, Brazil.

Growth Distribution

Our growth distribution segment is comprised of our interests in electricity distribution facilities located in developing countries where the demand for electricity is expected to grow at a higher rate than in more developed parts of the world. The conditions of the business environment in a developing nation also provide for significant opportunities to implement operating improvements that may stimulate growth in earnings and cash flow performance. These growth rates may be greater than those typically achievable in our other business segments. Often, however, these businesses face particular challenges associated with their presence in developing countries such as outdated equipment, significant electricity theft-related losses, cultural problems associated with customer safety and non-payment, emerging economies, and potentially less stable governments or regulatory regimes. Distribution facilities included in this segment may include generation, transmission, distribution or related services companies. The results of operations of our growth distribution business are sensitive to changes in economic growth and regulation, abnormal weather conditions affecting each local market, as well as the success of the operational changes that have been implemented.

We derive growth distribution revenues from the distribution and sale of electricity pursuant to the provisions of long-term electricity sale concessions granted by the appropriate governmental authorities, or in some locations, under existing regulatory laws and provisions. One of our distribution facilities, SONEL, is "integrated," in that it also owns electric power plants for the purpose of generating a portion of the electricity it sells. The facilities currently in this segment contribute approximately 850 gross MW of generation and serve nearly 4.7 million customers with sales exceeding 25,600 gigawatt hours in Argentina, Brazil, Cameroon, El Salvador, and Ukraine.


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