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AES Corp. to Divest Stake in UK Wind Projects for $160M

Zacks Equity Research

The AES Corp. (AES) has entered into a deal to sell its entire stake in four operating wind projects in the United Kingdom, totaling 87.5 megawatt (MW). The company is expected to receive $160 million, which is subject to customary purchase price adjustments.

The transaction, which is slated to wrap up in the third quarter of 2014, has been struck with SYND Holdco Limited – a joint venture between Greencoat UK Wind PLC and Swiss Life Funds (Luxembourg) Global Infrastructure Opportunities S.C.A.

The properties slated for sale comprise four operating wind projects in the United Kingdom. These include a 28.6-MW farm in Drone Hill, a 22-MW farm in North Rhins, a 20.5-MW farm in Sixpenny Wood and a 16.4-MW farm in Yelvertoft.

These four projects having a book value of $100 million were expected to add about $10 million to AES’ net income (after tax) in 2015. This deal will eliminate AES’ non-recourse debt by $134 million from the balance sheet as of June 30, 2014.

In addition to following systematic investment strategies in growth projects, AES continues to pursue asset divestment plans to exit markets and businesses where it is difficult to achieve a compelling competitive advantage.

In the process, the company has exited 8 foreign markets and reaped in proceeds of $497 million in 2013. AES plans to divest additional assets worth approximately $500 million to $700 million by 2015 though a systematic asset divestment program, ensuring more cash inflow. The company would thus be able to focus on its cash deployment strategy better.

AES Corp. is repurchasing its shares and prepaying recourse debt. Also keeping in mind stringent regulations on carbon pollution, AES Corp is working to make its generation portfolio more environmentally friendly. At present, 2,400 MW of environmental upgrades are under construction and on track to come online through 2018.

AES Corp. currently holds a Zacks Rank #3 (Hold). Other better-ranked players in the space include CMS Energy Corp. (CMS), Duke Energy Corp. (DUK) and Consolidated Edison, Inc. (ED), all with a Zacks Rank #2 (Buy).

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