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Investor Survey (help)
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Strength: Geographically Diverse Business (1) Weakness: Emerging Market Volatility (0) Opportunity: Share Buyback (1) Threat: Unstable governments (0) "Buy" Indicators (help) Insider Buying (enter symbol) "Sell" Indicators (help) Insider Selling (enter symbol) Sponsors |
The AES Corporation, through its subsidiaries, engages in the generation and distribution of electricity. It operates electric utilities, and sells power to customers in the retail, commercial, industrial, and governmental sectors. The company also generates and sells power to wholesale customers, such as utilities or other intermediaries. In addition, it develops alternative energy, including wind generation, supply of liquefied natural gas, greenhouse gas emission reduction projects, and new energy technologies. Further, it owns and operates water desalination plants in Qatar and Oman. As of December 31, 2006, it held interests in 97 power generation facilities totaling approximately 35 gigawatts of capacity. The company operates in Latin America, North America Generation, Europe, Africa, and Asia. The AES was founded in 1981 and is headquartered in Arlington, Virginia.
WikiWealth.com Industry Description: A public utility (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and regulation ranging from local community-based groups to state-wide government monopolies. ... Read more about the utility industry. Also see the Industry Analysis Home Page.
WikiWealth.com Industry Analysis: Utilities tend to be less sensitive to economic changes. During economic recessions, consumers tend to decrease discretionary expenses to save money, but they can not decrease utilities purchases, because they are needed for everyday living. Spending on utilities generally remains constant, so during economic recessions, investors tend to buy utilities stocks, which causes stock prices to increase. During economic recoveries, utilities stock prices generally underperform the general stock market. Investor who bought utilities stocks during the recession, tend to make new investments in faster growing industries. During longer economic expansions, utilities tend to grow at the same rate as the general stock market.
| Utility Industry Statistic | Stat | Notes |
|---|---|---|
| Stock Rating | Buy | … |
| Potential (safety margin) | 77% | High ~ Good for investors |
| WACC Analysis | 6% | Low ~ Good for investors |
| Enterprise Value Multiples | Stat | Notes |
| Revenue EV Multiple | 1.7x | … |
| EBITDA EV Multiple | 6.5x | … |
| EBIT EV Multiple | 10.4x | … |
| Cash Flow EV Multiple | 7.5x | … |
| Book Value EV Multiple | 1.8x | … |
| Discounted Cash Flow | Stat | Notes |
| Revenue Growth | 8% | … |
| EBITDA Margin | 31% | … |
| EBIT Margin | 20% | High ~ Good for investors |
| Cash Flow Margin | 10% | … |
| Taxes Rate | 22% | … |
| Debt-Equity Ratio | 82% | High ~ Bad for investors |
| ROIC | 5% | … |
| Reinvestment Rate | 9% | Low ~ Good for investors |
| WACC Discount Rate | Stat | Notes |
| Risk Free Rate | 4% | Low ~ Good for Investors |
| Cost of Debt | 7% | Low ~ Good for Investors |
| Equity Risk Premium | 5% | … |
| Debt Required Return of Debt | 5% | Low ~ Good for Investors |
| Required Return of Equity | 7% | Low ~ Good for Investors |
1 WikiWealth.com only uses the largest 30 companies in each industry for the basis of these financial measures. Each statistic is the market weighted average of the 30 companies.
2 Investment potential (margin of safety) is a weighted average of the discounted cash flow analysis (DCF), the enterprise value (EV) market multiple analysis, and the Warren Buffett investment analysis. WikiWealth obtains 80% of their quantitative investment potential from fundamental investment analysis.
3 The weighted average cost of capital (WACC) analysis for the industry is a broad representation of the WACC for each individual company. A sub-industry WACC analysis offers both stability and accuracy for each individual company.
WikiWealth.com Profit Analysis: The best way to profit from utilities stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) before economic recessions. Those investments should be undervalued (see Wall Street Analysis on left side), and have high Main Street Common Sense investment ratings (see Main Street Analysis on right side). When an economic recovery occurs, utilities stocks tend to underperform the general stock market, because consumers quickly resume spending on items they wanted, but resisted buying during tougher economic times. Utilities are generally items that consumers bought during a recession, but don't increase purchases during economic expansions. Eventually other stock investments become overvalued, because profits and stock prices increase past their fair values. During the last stages of an economic business cycle, just before a recession, it is best to buy utilities stocks, because they are the least risky equity investments in a declining stock market. As investors search for safe (less risky) stock investments, they tend to buy utilities. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments. Click for more information: stock research ratings.
Investment Moats are fundamental investing theories developed by Warren Buffett and adapted to the SWOT analysis. Investment moats are general characteristics that separate great investments from average stock investments. The wider the investment moat the better. Read more: Investment Moats. For company-specific investment moats: SWOT Analysis.
SWOT Strengths Increase Investor Moats: Below is a list of relevant industry investment characteristics, if any exist
Geographically Diverse Business (Votes:1) Geographically diverse business and revenue should help shield the business from shocks in any…
Regional Barriers to Entry (Votes:0) Some companies posses barriers to entry, because they own the exclusive government dictated…
Low Cost Input (Votes:0) The lower the input price, the lower the output price, especially in downward-trending markets….
SWOT Weaknesses Decrease Investor Moats: Below is a list of relevant industry investment characteristics, if any exist
Emerging Market Volatility (Votes:0) The volatility of emerging markets could increase risk and lower return for the following…
Debt Level (Votes:0) High leverage could be dangerous in a declining market. Partially reflected in the beta…
Triggers were developed by WikiWealth.com to predict changes in stock price direction, which depend on events outside of the control of the company. In general, if SWOT opportunities are greater than SWOT threats, the stock price should raise; the opposite is also true. For more precise measures, examine each SWOT opportunity and threat, then rank them according to importance and timing. The more important the investment characteristic, the greater the impact on stock direction. The sooner a investment trigger may occur, the more influence it will have on stock price direction. Read more: Stock Price Triggers. For company-specific stock price triggers: SWOT Analysis.
SWOT Opportunities are Positive Stock Price Triggers: Below is a list of relevant industry investment characteristics, if any exist.
Share Buyback (Votes:1) Although this opportunity will not last forever, AES is buying back shares, because they are…
Renewable Energy (Votes:1) Renewable energy could provide higher profit margins and revenue growth. Global initiatives to…
Energy Independence (Votes:1) Calls for energy independence may increase spending to achieve this goal, which will increase…
SWOT Threats are Negative Stock Price Triggers: Below is a list of relevant industry investment characteristics, if any exist.
Government Fiscal Problems (Votes:0) Next week represents a watershed moment for bond Insurers and the nations municipalities. The…
Foreign Currency Exposure (Votes:0) Exposure to foreign currencies can increase risk, because those currencies can be more volatile…
Unstable governments (Votes:0) Unstable government in oil producing countries could make the inventory supplies…
Long Company Description (help)
Combining deep local insights, global presence and perspective, and a relentless commitment to operational excellence and values, we help communities and countries grow through reliable and responsible electric power. We operate in extremely diverse markets, from the world’s most developed countries to some of the fastest growing economies. Everywhere we operate, we believe that dependable electricity is essential to human progress and to advancing economic growth, public health and security.
As one of the world’s largest power companies, AES owns and operates a diverse and growing portfolio of generation and distribution businesses with the capacity to serve 100 million people worldwide. Our power plants encompass a broad range of technologies and fuel types, from coal to gas to renewables such as wind, hydro and biomass. Our utilities power major cities, from São Paulo to Indianapolis to Douala. Beyond power, we also mine coal, turn seawater into drinking water, and are committing significant resources to alternative sources of energy to ensure a sustainable future. We also are building a climate change business, to develop projects that offset greenhouse gas emissions and produce emissions offset credits.
AES brings the combined expertise of a global force of 28,000 people to each of our businesses. Sharing knowledge among that network is a core component of the way AES does business. It’s how we work, and how we improve. Our customers and business partners count on the unique insights of our people, benefiting from the collective experience of AES. That’s why we deploy networks of experts—circulating ingenuity and best practices throughout our global enterprise to continually bring insights and expertise to each particular challenge.
AES has always been a values-driven company. Rooted in the cultures in which we live and work, we are dedicated to improving the lives of the people we serve. Honoring our commitments to all of our stakeholders—our customers, teammates, communities, owners, suppliers and partners—is explicitly part of our shared values. Our stated values put safety first and stress that all of our people act with integrity and strive for excellence. We also embrace having fun through work. It’s a unique aspect of our culture and people, who bring to work every day a passion and belief that AES can and does make a difference. These values both reflect who we are, and help to shape our future and the world around us.
History
For more than two decades, AES has helped drive energy sector growth and pioneered advances in many markets, generating global industry leadership from innovation and operational excellence.
AES has become a global industry leader. We’ve helped transform communities worldwide through the generation and distribution of electricity. At the forefront of deregulation in the US and then privatization in markets around the world, today we retain our entrepreneurial spirit and proven ability to succeed wherever opportunities arise.
Founded in 1981, AES built its first power plant in 1985 in Texas, which was also one of the first competitive power plants in the United States. During AES’s first five years, we added an additional three plants in three states in the US, and began looking for opportunities to take our financing, construction and operational know-how global.
In the early 1990’s, as markets opened up globally, AES began generating electricity in the United Kingdom, soon followed by Argentina, Pakistan, China, Hungary, Brazil and other emerging markets worldwide. An early mover, in 1998 we acquired a minority stake in a power plant in the first and only generation privatization in India. In West Africa and Central America, we have brought electricity to places that never knew reliable power, while electrifying urban centers, including São Paulo and Indianapolis. We have helped pioneer new pollution control technologies in the US and biomass conversions in Hungary. And we have continued to expand into burgeoning markets worldwide—to Qatar, Oman, Sri Lanka, Cameroon—and more recently to Bulgaria, where we are building our single largest greenfield project investment to date, and the first large scale plant to be built in that country in 20 years.
Today, we are expanding into new lines of business — like wind, climate change and other alternative energy areas — while growing our core electricity business through platform expansions and by continuing to enter new markets, such as southeast Europe. Following the acquisition of significant wind generation assets in the US, we finalized the construction of our first wind farm in Texas in 2006, the same state in which twenty years before we constructed our first power plant. Since then, we have expanded our wind business into the UK, France and Bulgaria — some of the fastest growing markets for wind generation in Europe. Today, we have more than 6,000 MW of wind generation projects in development worldwide.
In 2006, we made a significant investment in a greenhouse gas emission offset project, AES AgriVerde. AES expects to generate 34 million tonnes of greenhouse gas emissions offsets annually by 2012 through the capture of methane and other gases from agricultural waste through this subsidiary. We continue to look for new ways to reduce and offset greenhouse gas emissions, and are evaluating future investments in alternatives such as solar power and wave technologies.
Throughout our history, the people of AES have always stayed at the forefront of change, as a positive force in the energy sector as well as the communities in which we work and live. With significant global reach, deep local knowledge and distinctive operational skills, AES will continue to expand into new energy and infrastructure markets worldwide.
Frequently Asked Questions
1. What does AES do?
We generate and distribute electric power that has the potential to serve 100 million people around the world. We seek to expand our business by maximizing the value of our existing asset base, by developing and building new generation plants, and by acquiring and operating generation and distribution facilities from third parties.
2. What does AES stand for?
The company was originally founded as Applied Energy Services, which was later contracted to AES. Today the company’s legal name is The AES Corporation.
3. What kinds of fuels do you use in your power plants?
We use natural gas, coal, oil and biomass. Some of our plants have the flexibility to burn several fuels. We also harness water flows to create hydroelectric power and wind for wind power. We choose the method that makes the most sense for a particular situation, based on the site, prevailing regulations, fuel availability and other factors.
4. How do you decide where to build a power plant?
We make our decision based on such factors as a region’s need for power, who our partners might be, the regulatory environment, and the potential for operating a profitable enterprise.
5. How does an electric plant work?
Essentially, an electric power plant turns some form of energy into electricity. Natural resources such as gas, coal or oil are burned in a controlled environment (or, for hydroelectric power, flowing water is harnessed) to drive massive machines called turbines. They are connected to the electric generation system that produces the electrical charge. The electric power is then distributed through high-voltage wires to substations, on the way to serving communities, industries and businesses through medium- and low-voltage distribution lines.
6. What is a megawatt (“MW”)?
A megawatt is a million watts, sufficient power to light 10,000 100-watt bulbs, or enough electricity for around 3,000 households.
7. When did AES go public?
AES went public on June 25, 1991.
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