The AES Corporation
) has entered into an agreement with VS Energy International to
sell two of its power distribution businesses in Ukraine. Subject
to local regulatory approval, the transaction is expected to
close by mid 2013.
The company will sell its 89.12% and 84.56% equity interest in
AES Kyivoblenergo and AES Rivneoblenergo, respectively. AES
Kyivoblenergo provides services to 881,000 customers in the Kiev
region and AES Rivneoblenergo serves 412,000 customers in the
However, post-transaction, both the businesses will continue
their operations and keep supplying energy to customers.
The primary motive of the company behind divesting its businesses
is to simplify and strengthen its structure. The company hopes to
focus on markets where it has a compelling competitive advantage
or untapped opportunities. In June last year, the company sold
its 34.5 MW St. Patrick wind farm and its minority share of
InnoVent SAS for approximately $42 million to Boralex Europe S.A.
In fact, in Nov 2012, the company had announced its intention to
restructure its corporate support and subsidiary business
operations. It expects this restructuring to bring in an
additional $45 million of recurring cost savings. It expects
one-time restructuring expenses to be approximately $20 million
from 2012 through 2013.
These plans implemented across the company's service territories
are intended to minimize overhead costs. The divestitures too
will allow the company to have sufficient cash to invest in other
Currently, AES Corporation has business exposure to 27 countries
around the globe, which insulates it from any region-specific
risk. With a base of fossil fuel plants, the company is
predominantly involved in long-term contracts, which do not allow
for any rate base growth in the near term for its regulated
utilities. Besides its restructuring plans and initiatives the
company is committed to deliver a competitive total shareholder
return. The company presently retains a short-term Zacks Rank #2
On Feb 27, 2013, the company is expected to release its fourth
quarter and full year 2012 results. The Zacks Consensus Estimates
for the fourth quarter and full year 2012 are currently at 31
cents per share and $1.22 per share, respectively.
Other Zacks Rank #1 stocks to consider are
Pike Electric Corporation
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