AES Sells Wind Assets in France

Zacks

AES Southern Europe Holdings, B.V., a subsidiary of The AES Corporation (AES), has completed the sale of its 34.5 MW St. Patrick wind farm and its minority share of InnoVent SAS for approximately $42 million to Boralex Europe S.A. AES Corporation has sold its French interests in wind generation assets, with a cumulative capacity of 73MW.

The St. Patrick wind farm is located in the Nord-Pas-de-Calais and Picardie regions of France. The wind farm was built between July 2009 and February 2010. Under long-term contracts that will expire in 2024 and 2025, the energy generated is sold to Electricite de France.

In October 2006, The AES Corporation had purchased a minority interest in InnoVent SAS which is an independent, privately held developer of wind energy projects in France. Currently, it controls 114 MW of wind assets that are either in operation or under construction.

AES Corporation is a global power company that is spread over 27 countries in five continents. The wide geographical presence represents a diversified earnings base. Its main rationale behind selling these assets is to exit from some markets so that it can focus on those regions where it has a better competitive advantage. The company has once again proved that it is focused on maximizing shareholder returns. The company plans to use the sale proceeds in paring debt, investing in new businesses and repurchasing shares.

AES Corporation’s diversified nature has resulted in a portfolio that is well-positioned for capitalizing on regional differences in power prices and weather-driven demand. This protects the company from specific risks in any single region or country. Also, the company’s acquisition of DPL Inc. would boost its regulated electricity business in the North American market.

However, we remain concerned about commodity price risk and currency volatility. Moreover, it is a non-dividend paying stock. Therefore, we prefer to remain on the sidelines and suggest investors to wait for a favorable entry point. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

The company mainly competes with Duke Energy Corporation (DUK) and Edison International (EIX).

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