Sources of cash in 2014
By the end of 2014, AES Corporation (AES) expects to have between $1.68 billion and $1.75 billion in cash at its disposal. The sale of assets has contributed $1.04 billion to this sum. The rest of the cash comes from the carryover balance from 2013, free cash flow in 2014, and other sources.
Uses of cash in 2014
The management has allotted a major part of the cash to reduce the debt burden for the company. As margins decline, AES seems to be deleveraging from non-performing businesses and investing in businesses showing growth. This year, AES has invested $0.33 billion of its cash in the company’s subsidiaries.
For the year 2014, AES has planned to return nearly $0.48 billion to shareholders through share buybacks and dividends.
Source of cash and allocation in 2015
AES anticipates discretionary cash of about $0.95 billion to $1.05 billion in 2015. Close to 60% of this cash is expected from free cash flows next year. Proceeds from asset sales in Turkey and leftover cash from the current year will make up the rest of the cash pile in 2015.
A portion of this cash will be used to pay dividends to shareholders and invest in subsidiaries. Allocation of $0.6 billion of this cash has not been determined. AES is looking to invest in high-growth opportunities with this cash in 2015.
In 3Q14, AES spent more on share buybacks than any other power company. Other power companies that used cash for share buybacks include Edison International (EIX), Northeast Utilities (NU), and Public Service Enterprise Group (PEG). All of these companies are part of the Utilities Select Sector SPDR (XLU).