Shares of AES Corp. (AES) surged 14% in after-hours trading after Bloomberg reported that the utility company is exploring strategic options, including a potential sale. The move comes amid growing takeover interest from several large private equity and infrastructure firms, drawn by AES’s discounted renewable energy portfolio and long-term growth pipeline.
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Over the past two years, AES has seen its stock price cut nearly in half. It was down about 13% year-to-date before the takeover buzz lifted sentiment. The company’s current market cap is around $8 billion, but its enterprise value stands closer to $36 billion, reflecting $30 billion in debt and nearly $2 billion in cash. That debt load has weighed on investor sentiment, but it also creates a valuation setup that some firms see as an opportunity.
Renewables in Focus as AES Draws Buyout Buzz
What’s attracting attention is AES’s renewable asset base. More than half of the company’s energy generation is renewable, totaling 18.4 gigawatts across solar, wind, hydroelectric, and storage sources. The company added 3.5 gigawatts of renewable capacity in 2023 alone, nearly doubling the previous year’s pace. It also has a development backlog of 12.3 gigawatts, with 5.1 gigawatts already under construction.
Several high-profile projects are underway, including a 220-megawatt solar project in Pennsylvania and a 238-megawatt wind development in Arizona. AES operates more than 200 renewable projects across states like California, New York, Georgia, and Hawaii.
Analysts suggest that AES’s renewable assets are undervalued by roughly 64% based on intrinsic value estimates. A discounted cash flow analysis points to a fair value of $20.38 per share, compared to the pre-news trading price near $11. That gap may explain why long-term infrastructure investors are circling.
Unlocking AES’s True Value
Recent transactions support the company’s ability to unlock value. In one deal, AES sold a 30% indirect stake in AES Ohio to CDPQ for $546 million while keeping operational control. It was seen as a smart way to bring in capital without losing control of assets.
The renewed interest in AES could push the board to consider more aggressive steps to boost shareholder value. Whether that results in a full sale or a series of asset deals remains to be seen, but for now, investors are paying attention.
Is AES Stock a buy?
In the midst of all the buzz, AES Corp boasts a Hold rating among the Street’s analysts. The average AES stock price target stands at $13.14, implying an 18.70% upside.
