The AES Corp.
) has struck a deal under which it intends to sell a minority stake
in the Masinloc power plant as well as development projects in the
Philippines to Electricity Generating Public Company (EGCO), a
Thailand-based independent power producer. The transaction is
valued at $453 million.
The assets earmarked for sale comprise a 45% stake in the 630
megawatt (MW) Masinloc coal-fired power plant that has been in
operation since 1998. The company will also eschew other
development projects like the expansion of the existing Masinloc
facility and approximately 60 MW of potential energy storage
projects in advanced development.
Post transaction, AES will retain a 51% operating interest in
Masinloc, while EGCO will hold 41% and the International Finance
Corporation (IFC) the balance 8%. The transaction is expected to
close in the third quarter of 2014. For AES Corp, the partial stake
sale will be neutral to its 2014 earnings and beyond.
Though economic growth in the Philippines fell below 6% in the
first quarter of 2014 due to natural disasters, economic activity
is expected to pick up in the rest of the year. Demand for energy
will continue to see an uptrend in these developing economies. AES
Corp. and EGCO Group hope to meet this demand, utilizing the
Masinloc platform, to provide reliable and affordable energy.
AES Corp. has lately been divesting assets to streamline its
portfolio and concentrate on its core operations. Recently, AES
Corp. announced that it has entered into a deal with
) to divest 50% of its interest in the 336 MW solar photovoltaic
(PV) projects owned by Silver Ridge Power, LLC. AES Corp.'s
decision to sell half of its interest in the solar project is
strategic, as solar holds a nominal share in the company's overall
generation mix and will not hurt its renewable generation
portfolio. Presently, it is focused more on expanding its wind and
hydroelectric assets instead.
Going forward, bullish power demand in the markets of Chile,
Central America and Asia is the key factor behind the company's
increased utility-scale investments in these regions. The company
has been systematically exiting non-competitive markets to focus on
high-growth assets. It has a sizeable construction backlog of 4,100
MW, comprising a 1,320 MW coal plant in India and the 531 MW
hydroelectric project in Chile.
Currently, the company carries a Zacks Rank #3 (Hold).
Better-ranked utility players worth considering include Zacks
Ranked #1 (Strong Buy)
Black Hills Corporation
NRG Energy, Inc.
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AES CORP (AES): Free Stock Analysis Report
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