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AES Corporation: Bright Path Ahead

Mar. 06, 2020 10:01 AM ETThe AES Corporation (AES)SIEGY, SMAWF, TSLA6 Comments


  • AES Corporation is still one of the most promising power companies despite a tepid Q4.
  • AES Corporation's focus on renewables and energy storage will be key to the company's long-term success.
  • The company's doubling down on renewables does not come without its risks.

AES Corporation (NYSE:AES) is fully embracing the shift towards renewables in the electricity industry. This transition towards renewable energy solutions is already starting to give the company a competitive edge over competitors. AES Corporation is building a clean energy infrastructure that should help drive growth over the long term.

AES Corporation recently reported Q4 revenues of $2.43 billion, missing expectations by ~$500 million. However, the company beat EPS expectations by $.02 with an EPS of $.35. While AES Corporation clearly did not blow past Q4 targets, the company is on a solid growth path.

Doubling Down On Clean Energy

AES Corporation is building an impressive renewables portfolio. In 2019 alone, the company signed 2.8 GW worth of renewable contracts. These contracts bring AES Corporation's total backlog to 6.1 GW, most of which consists of renewables. The company's major moves in renewables are going a long way in reducing the company's carbon intensity.

AES Corporation's backlog reflects the company's growing interest in renewables.

Source: AES Corporation

Given that global environmental regulations are trending in a stricter direction, AES Corporation's decision to reduce its reliance on fossil fuels is incredibly smart. This transition to renewables is further bolstered by the company's goal of reducing its coal-fired generation to below 30% by the end of 2020. Renewables like solar and wind are becoming cost-competitive with fossil fuels and is set to supplant more traditional energy sources in a growing number of regions.

The company's growing focus on solar is particularly promising given how fast solar technology is advancing. In fact, solar is now regularly cheaper than fossil fuels even without financial assistance. With no end in sight for the exponentially decreasing solar cost trend, AES Corporation's investments into this space are highly promising.

Subsidiary AES Gener is expected to more than double its

This article was written by

AWS Certified Solutions Architect, AWS Certified SysOps Admin, AWS Certified Cloud PractitionerTop ~5% performer on Tipranks among all analysts and experts. https://www.tipranks.com/bloggers/simple-investment-ideas.

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Comments (6)

@Simple Investment Ideas Isn't their D/E (much) too high at 386% even for a utility? $NEE, $D, $DUK, $SO all have D/E between 100% and 150%
This is in conjunction with their "junk" credit (Ba1/BB+), while the above companies all have investment-grade credit rating (BBB+ to A-)
Moodys just raised for AES to Baa3, so its now above junk, but not by much.
@ksickler Interesting...I didn't follow $AES anymore because the debt is much too high for my taste and I am not familiar with utilities, I have only 2-3 from the big and stable names.
But, after seeing the price halved, the risk/reward ratio is the one which is greatly improved for $AES.
Good luck!
The only renewable company I am aware of where long-term shareholders have done well is Next Era. And I've looked at many. I'm a 35 year energy industry professional, including oil and gas, conventional power generation and renewable power development (with Iberdrola). Poor rates of return and overhyping of the technology go hand in hand. The storage problem of wind and solar is routinely underestimated. We are going to need nuclear energy to revitalize itself.
Awayk profile picture
Would comment on why NEE is able to be successful when others can't?
The PE of NEE - Nextera is huge. Which would indicate hype is boosting the share price. Are there any measures that justify the share price?
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