AES Corporation (AES) will dispose its AES Eastern Energy, operating four coal- fired plants in New York, according to sources. These plants sell power under short-term contracts.
The four coal−fired plants − Cayuga, Greenidge, Somerset and Westover − have a generation capacity of 1,169 megawatts. In its earrings conference call, AES Corporation stated that AES Energy recorded an impairment charge of $827 million attributable to lower power prices, prospects for lower prices and a credit-rating cut by Standard & Poor’s.
The write-down also led to a net loss of $169 million or 56 cents per share in the fourth quarter of 2010. Also, following the curb on forward sales, profit of AES Eastern Energy contracted.
Experts anticipate those plants to fetch $500 million to $600 million to the company based on comparable sales.
Yesterday, AES Corporation reported fourth quarter 2010 adjusted EPS of 23 cents, lower than the Zacks Consensus EPS estimate of 25 cents. However, adjusted EPS for the quarter was 2 cents ahead of the year-ago EPS of 21 cents.
The year-over-year growth in earnings was attributable to favorable operating results in Latin America and a lower effective tax rate, partially offset by a settlement agreement for gas transportation contracts at a Latin American generation business, higher share count and increased business development costs.
The Zacks Consensus Estimate for first-quarter 2011 is 25 cents per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, 95 cents per share and $1.11 per share.
We maintain our long-term Neutral recommendation on AES Corporation. The quantitative Zacks #4 Rank (short term Sell rating) for the company indicates downward pressure on the stock over the near term.
Based in Arlington, Virginia, AES Corporation operates globally and is involved in the generation, distribution, transmission and selling of electricity to end-customers in the residential, commercial, industrial and governmental sectors. It competes with Edison International (EIX).
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