AES to Develop Turkish Project - Analyst Blog

The AES Corporation ( AES ) announced that its joint venture with Koc Holding in Turkey, AES Entek, has entered into an agreement to develop Ayas, a 625 MW greenfield coal project in South East Turkey. The Ayas project is an equally owned joint venture between AES Entek and Oyak, Turkey's largest pension fund.

AES expects to complete the project by the second half of 2016 with construction set to begin in late 2012. AES currently operates three gas plants in Turkey with a total capacity of 302 MW along with 62 MW of small hydro facilities.

AES's focus on Turkey comes at an opportune moment with Eurostat forecasting the Turkish economy to grow by 5% in sharp contrast to its European peers ravaged by the European debt crisis. Also, the country's installed capacity of 52 GW of coal, geothermal, hydroelectric, natural gas and wind facilities is touted to increase by as much as 30% by 2016.

The AES Corporation is a global power company with generation and distribution businesses. Through a diverse portfolio of thermal and renewable fuel sources, the company provides affordable and sustainable energy to 27 countries. AES's business exposure around the globe 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. Additionally, the company has a successful track record in the U.S. utility sector with its investment in Indianapolis Power & Light Company.

However, AES Corp's focus on long-term supply contracts exposes the company to commodity price risk and its significant presence around the globe makes it vulnerable to foreign currency volatility. Taking these factors into account the company presently retains a short-term Zacks #4 Rank (Sell). Over the longer run we maintain our long-term Neutral recommendation on the stock. This is in line with its peers like Duke Energy Corporation ( DUK ) and Consolidated Edison Inc. ( ED ).

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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 Nasdaq, Inc.

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

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