The AES Corp. posted mixed financial results in the first quarter
of 2014 with earnings trailing the Zacks Consensus Estimate while
revenues beating the same. Poor hydrology conditions, lack of gas
availability and forced outages proved to be a drag on the
company's earnings. AES Corp.'s strategic exits from non-core
markets and subsequent focus on high-return assets will act as
tailwinds. The company benefited from its cost-saving initiatives
and will continue to move ahead with the measures which will lend
stability to its margin. The bullish power demand from the
international markets will further support the company's series of
utility-scale projects. In addition, effective share repurchase
program and attractive dividend growth will retain investors'
confidence on the stock. However, strict environmental mandates and
rise in corporate income tax by foreign countries could act as
growth deterrents. Thus, we maintained our Neutral recommendation
on the stock
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 located in the United States, the Andes
(Chile, Columbia and Argentina), Brazil, MCAC (Mexico, Central
America and Carribean), EMEA (Europe, Middle East, Africa) and
AES Corporation 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 Corporation'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
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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