AES Corporation’s (AES) wholly-owned subsidiary AES Wind Generation acquired Your Energy Ltd, a U.K. based wind developer. The company also has signed an agreement to acquire a 51% stake in a wind portfolio from 3E, a Polish wind energy developer. AES Corporation is focusing on the 2009 EU Renewable Energy Directive. Per the directive, both U.K. and Poland must meet 15% of their gross energy consumption through renewable sources by fiscal 2020.
AES Corporation’s recent wind forays will add more than 700 MW to its European wind generation pipeline. However, as per company estimates it will have to invest $400 million to complete both the projects. Of that amount, $120 million will be invested in order to bring 200 MW into construction by the end of 2011.
Apart from the two new projects AES Corporation’s three wind projects will be operational in fiscal 2010. These projects are the 35 MW St. Patrick project in France, the 22 MW North Rhins project in Scotland, and the 156 MW St. Nikola project in Kavarna, Bulgaria.
AES Corporation’s acquisition of Your Energy brings in a wind energy development pipeline of more than 300 MW. Of that amount, AES Wind Generation plans to begin construction on 48 MW by the end of fiscal 2010.
The agreement with 3E marks AES Wind Generation’s entry into the Polish wind market. According to the agreement, AES Wind Generation would acquire a 51% stake in 422 MW of 3E’s development pipeline. AES Wind Generation expects to begin construction on approximately 34 MW in 2010 and 120 MW in 2011.
AES Wind Generation has approximately 1,700 MW of wind capacity in operation globally, and expects to bring an additional 99 MW on-line in China by the end of 2010. Earlier this year, AES Wind Generation brought the 101 MW Armenia Mountain project on-line in Pennsylvania. The current development pipeline includes approximately 6,000 MW of projects across Asia, Europe and North America.
Arlington, Virginia-based AES Corporation is a global power company that owns and operates electric power generation and distribution businesses in 29 countries. The company’s operations are divided into three segments: Regulated Utilities, Contract Generation, and Competitive Supply. The company clocked 2009 revenue of $14 billion and owns and manages $40 billion in total assets.
By fuel type, AES’s capacity portfolio is approximately 41% coal, 39% gas, 16% hydro and 4% oil. Close to 56% of its total revenue is generated in Latin America with the balance (44%) in North America, Europe, Asia, the Middle East and Africa. Revenue is equally derived from generation and distribution, and almost 80% of generation revenue is under long-term contracts.
Our near-term Sell recommendation on the Zacks Rank #4 AES stock takes into account the significant international presence of its fossil fuel power plants in several emerging markets, thereby exposing it to both foreign currency and political risk. The company’s predominantly long-term contracts preempt any rate base growth in the near term for its regulated utilities. Also, with lower electricity demand in the near-term due to a tepid global economy, the fate of spot wholesale markets is not encouraging.
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