The AES Corporation (AES): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


We have downgraded our recommendation on The AES Corporation to Underperform from Neutral, due primarily to the possibility of lower electricity consumption this winter in the U.S. This is likely to impact sales adversely. In addition, commodity price risks, stringent environmental regulations, and foreign currency political and operational risks might hinder growth. In the third quarter of 2014, AES Corp.'s earnings per share surpassed the Zacks Consensus Estimate while revenues missed. On a year-over-year basis, the bottom line decreased mainly due to poor hydrology at its Brazil Strategic Business Units and outages at the Masinloc facility in Philippines.


Arlington, VA-based The AES Corporation (AES), incorporated in 1981, is a global power company. The company's businesses are spread across 5 continents in 20 countries. The company has six Strategic Business Units (SBUs) located in the United States, the Andes (Chile, Columbia and Argentina), Brazil, MCAC (Mexico, Central America and Carribean), EMEA (Europe, Middle East, Africa) and Asia.

AES Corp. operates in two lines of business Generation and Utilities.


In the generation business, the company operates power plants to generate and sell power to wholesale customers such as utilities and other intermediaries. AES Corp.'s generation business consists of 106 generation facilities. The generation business uses a range of technologies and fuel types including coal, combined-cycle gas turbines, hydroelectric power and biomass. The company is the largest generator of electricity in Panama and the second largest in Chile. The majority of electricity produced by the Generation business is sold under long-term contracts, or Power Purchase Agreements (PPA), to wholesale customers.


In the utilities business, the company operates utilities to distribute, transmit and sell electricity to customers in the residential, commercial, industrial and governmental sectors in a defined service area. These businesses have structures ranging from pure distribution businesses to fully integrated utilities, which generate, transmit and distribute power.

At the end of 2013, the company owned gross generation capacity of 37,159 megawatt (MW) with a customer base of 11.5 million.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Stocks

Referenced Stocks: AES , PPA

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