AES Rides on Renewable Expansion & Growing Presence in LNG Space

The AES Corporation AES focuses on increasing its renewable energy generation by adding solar, wind and battery energy storage to meet its long-term clean energy goals. It has also been expanding its footprint in the liquefied natural gas (LNG) market.

However, this Zacks Rank #2 (Buy) company faces risks like a decline in wholesale prices.

Tailwinds Favoring AES

Like other utility providers, AES has been expanding its renewable generation portfolio to gain from the rising demand for electricity in its service areas. In 2024, it completed the construction of 3 gigawatts (GW) of wind, solar, gas and energy storage and expects to add a total of 3.2 GW to its operating portfolio by the end of 2025.

To encourage clean energy adoption, AES has been aggressively retiring coal-fired units, lowering carbon emissions from its portfolio. In 2024, the company retired 481 megawatts (MW) of coal generation in Chile and the United States.

AES operates LNG import terminals in the Dominican Republic, with 160,000 cubic meters of storage capacity. The company has long-term contracts to supply re-gasified LNG to industrial users and third-party power plants, meeting demand from both industrial and commercial customers.

AES completed the construction of a new 670 MW combined-cycle gas plant in Panama. This plant should result in much greater utilization of AES Corp.’s existing LNG regasification and storage tanks in the country.

Headwinds Faced by AES

Wholesale electricity costs have fallen dramatically in recent years due to the growing use of renewable energy supplies, low-cost natural gas and demand-side management. New power purchase agreements for renewable power have been given in many areas at much lower costs than those awarded a few years ago. This downward trend in wholesale pricing is expected to persist, which might have a negative influence on AES' financial performance.

As of Dec. 31, 2024, AES had a long-term debt of $25.43 billion and a current debt of $3.59 billion. The company’s cash equivalents, worth $2.04 billion as of Dec. 31, 2024, remained much lower than its long-term and current debt levels.

AES Stock Price Movement

In the past month, AES shares have fallen 12.9% compared with the industry’s decline of 1%.

Other Stocks to Consider

Some other top-ranked stocks from the same industry are CMS Energy Corporation CMS, CenterPoint Energy CNP and NiSource Inc. NI, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CMS’ long-term (three to five years) earnings growth rate is 7.7%. The company delivered an average earnings surprise of 4.76% in the last four quarters.

CNP’s long-term earnings growth rate is 7.5%. The company delivered an average earnings surprise of 0.76% in the last four quarters.

NiSource’s long-term earnings growth rate is 7.9%. The company delivered an average earnings surprise of 23.02% in the last four quarters.

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This article originally published on Zacks Investment Research (zacks.com).

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