Share Buyback

Advanced Investment Research » SWOT Analysis Summary » Swot Opportunity » Share Buyback

Although this opportunity will not last forever, AES is buying back shares, because they are obviously undervalued according to the company's own valuations. The news article is here:

http://www.streetinsider.com/Earnings/The+AES+Corp.+(AES)+Reports+Mixed+Q2+Earnings%3B+Raises+FY08+Guidance%3B+Announces+$400M+Buyback/3892376.html

How this helps the company and your shares is as follows: less shares equal more value for remaining shares, which should increase the share price for all remaining shares outstanding.

As of 10.7.2008 Insiders were buying lots of shares: http://www.streetinsider.com/Insider+Trades/AES+Corporation+(AES)+Execs+Buy+Shares/4050739.html

Additional Comments for Why Insiders are the Company are Buying Back Shares:

A few highlights from the most recent presentation by management (find the full presentation at AES.com, investor info, presentations and webcasts):

Low exposure to oil, gas or coal price movement. 77% of all contracts contain fuel passthrough; 90% of remainder is hedged with short term instruments.

Manageable exposure to interest rates. 78% is fixed rate. 100 bp move affects eps by 2-3 cents.

Strong cash flow means little real exposure to credit crunch affecting many other companies. Cash flow in every year between now and 2015 should far exceed debt maturities.

New project development should triple wind business by 2012 and double overall eps over same time frame to more than $2 per share. So company trades today at less than 5x earnings in four years.

Willingness to sell developed projects (e.g. Khazakstan) or portions of projects at the right price. Should help assure that cash needs of future development can be met internally.

My take: at some point the market will see the difference between this and the other higher risk independent power companies and we will be the better for it. Until then, we can either join management and buy, or watch. - (edit / improve)