AES - Embedded Expectations Analysis - 2021 10 12
The AES Corporation (AES:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 34.1x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about supply chain issues, the sustainability of demand, and the execution of transformational modernization programs.Specifically, management may lack confidence in their ability to execute their grid modernization, utility modernization, and decarbonization programs. In addition, they may have concerns about the sustainability of electricity demand in Latin America and utilities demand in Ohio and Indiana. Moreover, management may lack confidence in their ability to accelerate new renewable contracts, grow 5B's footprint across several markets, and meet their target of more than 50% of earnings from renewables by 2025. Furthermore, they may have concerns about potential legislation on early coal retirement in Chile, the impact of the Hoshin WRO on their supply chain, and the progress of the proposed extension of their facility at Redondo Beach.
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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