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