UPDATE: AES Will Sell 15% Stake To China's Sovereign Fund
(Updates to add conference call, details, recent share price)
By Mark Peters
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- AES Corp. (AES) said Friday it will sell $1.58 billion
in stock to China's sovereign-wealth fund as the power plant developer raises
capital for further international growth.
Under the pact, China Investment Corp. is getting a 15% stake in AES for $
12.60 a share. That's a 9.1% discount to Thursday's closing price, which raised
the ire of some investors. CIC also signed a letter of intent to invest $571
million in AES's wind generation business for an estimated 35% stake.
"This is really a game changer for AES," said Chief Executive Paul Hanrahan
during a conference call Friday.
The deal comes as China moves to diversify its $2 trillion in foreign-currency
reserves.
CIC and other state-controlled companies have made acquisitions and other
investments around the world. Although based in the U.S., AES derives a majority
of its revenues in the 28 other countries where it operates. Still, Asia
represents one of its smallest markets, but presents the strongest opportunity
for growth.
Hanrahan touted the deal as a way to move ahead on AES's pipeline of
development projects and free up the company to pursue merger and acquisition
opportunities. He added the deal builds a relationship with CIC that will help
grow the company in Asia.
Some investors during the conference call raised concerns about the deal,
questioning the discount CIC was given, while pushing management for specifics
on how AES would benefit from the new relationship. Hanrahan said the deal
brings in a large amount of capital at once to move forward on proposed
projects. He also stressed the access to projects, financing and equipment the
partnership with CIC could produce.
"It is really going to be a partnership where they can help us and we can help
them," he said.
The deal requires review from the U.S. Committee on Foreign Investment and
antitrust regulators--approvals are expected in the first half of next year.
Investments by China in U.S. infrastructure companies have faced political
resistance. AES's significant non-U.S. holdings could ease such concerns.
Moreover, the landscape has shifted a bit during the credit crisis, as American
companies' appetite for Chinese capital has increased.
Hanrahan said he doesn't expect the deal to face national security concerns.
Also Friday AES said third-quarter profit rose 28% on improved results at its
generation businesses in Chile and the Philippines. Contributions from these
units helped offset weaker results in North America. AES lifted its 2009
earnings target to $1.07 to $1.11 a share from $1.05 to $1.10. Earnings were $
185 million, or 28 cents a share, compared with $145 million, or 22 cents, a
year earlier. Excluding hedging and other factors, earnings fell to 26 cents
from 31 cents.
Revenue fell 11% to $3.84 billion, largely reflecting currency conversion.
Gross margin rose to 26.3% from 22.3% on lower fuel costs.
Shares of AES recently traded up 2.7% to $14.24.
-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com;
(Nathan Becker in New York contributed to the article.)
(END) Dow Jones Newswires
11-06-091416ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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