AES - Embedded Expectations Analysis - 2021 06 28
The AES Corporation (AES:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 27.2x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about power purchase agreement momentum, their positioning within the renewables market, and 5B innovationSpecifically, management may lack confidence in their ability to continue to obtain signed contracts for renewables, utilize the remaining capacity under their Liquefied Natural Gas (LNG) contract, and sustain power purchase agreement (PPA) momentum. Moreover, they may be concerned about the potential of the strategic collaboration between Fluence and Northvolt, their deal with Google, and the innovation potential of 5B. Management may also lack confidence in their ability to fund their growth plans through 2025, and they may be exaggerating their leadership position in the growing renewables market. Furthermore, they may lack confidence in their ability to meet carbon-free energy targets through portfolio optimization, maintain low emissions through their LNG supply chain, and achieve coal generation reduction goals
AES is a holding company. Through its subsidiaries, the company operates a portfolio of electricity generation and distribution businesses. The first business line is generation, where the company owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries. The second business line is utilities, where the company owns and/or operates utilities to generate or purchase, distribute, transmit and sell electricity to end-user customers in the residential, commercial, industrial and governmental sectors within a defined service area. In certain circumstances, the company's utilities also generates and sells electricity on the wholesale market.
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