AES Agrees to Sell its Equity Interest in AES Brasil for Approximately $640 Million

Rhea-AI Summary

The AES (NYSE: AES) has agreed to sell its 47.3% equity interest in AES Brasil to Auren Energia for approximately $640 million. This sale is part of a merger between AES Brasil and Auren Energia, valuing AES Brasil shares at about 11.55 Brazilian Real per share before adjustments. The deal is expected to close in 4 to 6 months, pending customary approvals and a late-stage construction project completion.

Proceeds from the sale will support AES' growth in renewables and U.S. utilities. This transaction aligns with AES' strategy to simplify its portfolio and strengthen its balance sheet. AES aims to reinvest in supplying renewable energy to corporate customers in the U.S. and expanding its utilities. With this sale, AES has achieved over half of its $3.5 billion asset sale proceeds target set for 2027.

Positive

• AES will receive approximately $640 million from the sale of its 47.3% equity interest in AES Brasil.
• The transaction aligns with AES' strategy to simplify its portfolio and strengthen its balance sheet.
• Proceeds will support AES' growth in renewables and U.S. utilities.
• AES has achieved over half of its $3.5 billion asset sale proceeds target for 2027.
• The sale includes a diverse renewable energy portfolio: 51% hydroelectric, 43% wind, and 6% solar.

Negative

• The transaction's completion is contingent on customary approvals and a late-stage construction project.
• Potential risks include delays in closing and unforeseen challenges in the construction project.
• The sale price of approximately 11.55 Brazilian Real per share may be subject to purchase price adjustments.

Insights

Financial Analyst

This sale of AES Brasil shares for approximately $640 million represents a significant strategic move for AES Corporation. By divesting its 47.3% equity interest in AES Brasil, AES is streamlining its operations and concentrating on core growth areas, particularly renewables and US utilities. This strategy aligns with AES' objective to achieve $3.5 billion from asset sales by 2027, with over half of this target now realized.

The transaction price of 11.55 Brazilian Real per share reflects a high valuation for AES Brasil's renewable energy portfolio, which includes a balanced mix of hydroelectric, wind and solar assets. This sale helps strengthen AES' balance sheet, providing liquidity to invest in high-potential areas. Investors should note that this realignment will likely enhance the company's long-term profitability, given the growing demand for renewable energy in the US. However, the deal's completion is contingent on several approvals and the completion of a construction project, introducing some uncertainty in the short term.

In conclusion, this transaction is a positive step for AES, improving its financial position and focusing on growth markets. Investors should consider both the potential benefits and risks associated with the deal's pending approvals.

Market Research Analyst

From a market perspective, AES' decision to sell its stake in AES Brasil to Auren Energia can be seen as a strategic pivot towards higher-growth markets. The Brazilian renewable energy market has grown rapidly and this sale allows AES to capitalize on its investments. Auren Energia, with a similar operational footprint in Brazil, appears to be a fitting new owner, likely to continue and perhaps expand the capabilities of the acquired assets.

This transaction also signifies a broader trend of energy companies divesting non-core assets to concentrate on renewables and markets with higher returns. AES' focus on the US market is sensible given the country's increasing corporate demand for renewable energy, which is expected to offer more stable and lucrative growth opportunities. This shift also aligns with global trends towards sustainability and green energy investments.

While the deal supports AES' strategic goals, it also underscores the importance of regulatory and operational hurdles that can impact the timing and final outcome of such transactions. Investors should monitor these aspects closely.

Proceeds to be Used to Fund AES' Robust Growth in Renewables & US Utilities

ARLINGTON, Va., May 15, 2024 /PRNewswire/ -- The AES Corporation (NYSE: AES) announced today that it has agreed to sell its 47.3% equity interest in AES Brasil to Auren Energia for approximately $640 million in proceeds to AES.  This sale will be completed in conjunction with a merger between AES Brasil and Auren Energia, with AES Brasil shares valued at approximately 11.55 Brazilian Real per share, before purchase price adjustments.

"We are very proud of the work our people have done in Brazil for more than 25 years.  They significantly improved operations at our hydroelectric facilities, created new commercial products, and built a portfolio of more than 3 GW of new wind and solar assets.  As one of Brazil's leading renewable companies, with a similar footprint, we see Auren as the right owner of these assets to achieve greater economies of scale and continue to serve the Brazilian market with clean and reliable energy," said Andrés Gluski, AES President and Chief Executive Officer.  "With this transaction, AES is continuing to simplify its portfolio, while meeting its strong balance sheet objectives.  We are now focusing the vast majority of our investments into supplying renewable energy to corporate customers in the US and our rapidly growing utilities."

Including this sale, as well as others closed in 2023 and 2024, AES will have achieved more than half of its $3.5 billion asset sale proceeds target through 2027.

Today's announcement is an agreement to sell AES' 47.3% interest in AES Brasil's 5.2 GW portfolio of renewable energy that is 51% hydroelectric, 43% wind and 6% solar.  The transaction is expected to close in 4 to 6 months and is subject to customary closing approvals, and a condition precedent related to completion of a late stage construction project.    

About AES

The AES Corporation (NYSE: AES) is a Fortune 500 global energy company accelerating the future of energy.  Together with our many stakeholders, we're improving lives by delivering the greener, smarter energy solutions the world needs.  Our diverse workforce is committed to continuous innovation and operational excellence, while partnering with our customers on their strategic energy transitions and continuing to meet their energy needs today.  For more information, visit www.aes.com.

Safe Harbor Disclosure

This news release contains forward-looking statements within the meaning of the Securities Act of 1933 and of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, those related to future earnings, growth and financial and operating performance. Forward-looking statements are not intended to be a guarantee of future results, but instead constitute AES' current expectations based on reasonable assumptions. Forecasted financial information is based on certain material assumptions. These assumptions include, but are not limited to, our expectations regarding accurate projections of future interest rates, commodity price and foreign currency pricing, continued normal levels of operating performance and electricity volume at our distribution companies and operational performance at our generation businesses consistent with historical levels, as well as the execution of PPAs, conversion of our backlog and growth investments at normalized investment levels, and rates of return consistent with prior experience.

Actual results could differ materially from those projected in our forward-looking statements due to risks, uncertainties and other factors. Important factors that could affect actual results are discussed in AES' filings with the Securities and Exchange Commission (the "SEC"), including, but not limited to, the risks discussed under Item 1A: "Risk Factors" and Item 7: "Management's Discussion & Analysis" in AES' 2023 Annual Report on Form 10-K and in subsequent reports filed with the SEC. Readers are encouraged to read AES' filings to learn more about the risk factors associated with AES' business. AES undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except where required by law.

Any Stockholder who desires a copy of the Company's 2023 Annual Report on Form 10-K filed February 26, 2024 with the SEC may obtain a copy (excluding the exhibits thereto) without charge by addressing a request to the Office of the Corporate Secretary, The AES Corporation, 4300 Wilson Boulevard, Arlington, Virginia 22203. Exhibits also may be requested, but a charge equal to the reproduction cost thereof will be made. A copy of the Annual Report on Form 10-K may be obtained by visiting the Company's website at www.aes.com.

Website Disclosure

AES uses its website, including its quarterly updates, as channels of distribution of Company information.  The information AES posts through these channels may be deemed material.  Accordingly, investors should monitor our website, in addition to following AES' press releases, quarterly SEC filings and public conference calls and webcasts.  In addition, you may automatically receive e-mail alerts and other information about AES when you enroll your e-mail address by visiting the "Subscribe to Alerts" page of AES' Investors website.  The contents of AES' website, including its quarterly updates, are not, however, incorporated by reference into this release.

Investor Contact: Susan Harcourt 703-682-1204, susan.harcourt@aes.com
Media Contact: Amy Ackerman 703-682-6399, amy.ackerman@aes.com 

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SOURCE The AES Corporation

FAQ

What is the value of the AES Brasil sale?

AES will receive approximately $640 million from the sale of its 47.3% equity interest in AES Brasil.

What is the AES Brasil share valuation in the transaction?

AES Brasil shares are valued at approximately 11.55 Brazilian Real per share before purchase price adjustments.

When is the AES Brasil sale expected to close?

The transaction is expected to close in 4 to 6 months, pending customary approvals and a late-stage construction project completion.

What will AES do with the proceeds from the sale?

The proceeds will be used to fund AES' growth in renewables and U.S. utilities.

What is the composition of AES Brasil's renewable energy portfolio?

AES Brasil's renewable energy portfolio consists of 51% hydroelectric, 43% wind, and 6% solar.

How does this sale align with AES' business strategy?

The sale aligns with AES' strategy to simplify its portfolio and achieve strong balance sheet objectives.

How much of its asset sale proceeds target has AES achieved?

Including this sale, AES has achieved more than half of its $3.5 billion asset sale proceeds target through 2027.