NEW YORK: AES Corp, which provides renewable power to tech giants such as Microsoft Corp, is exploring options including a potential sale amid takeover interest, people with knowledge of the matter say.
Infrastructure investors including Brookfield Asset Management Ltd and BlackRock Inc’s Global Infrastructure Partners unit have been studying AES after the company’s shares lost about half their value over the past two years, the people said.
With an enterprise value of about US$40bil, a leveraged buyout of Arlington, Virginia-based AES would still rank among the biggest of all time.
Shares of AES jumped the most since 2008. They closed up almost 20% to US$13.26 in New York trading, giving the company a market value of about US$9.4bil after a 38% drop in the stock over the past 12 months as of Tuesday.
AES owns a fleet of renewable power assets, including wind and solar, as well as natural gas and coal assets and two utilities in Indiana and Ohio.
The company aims to provide renewable power to data centre companies and has signed deals with technology customers including Google, Microsoft and Amazon.com Inc.
There’s no certainty that any of the suitors will decide to pursue a deal for AES, the people said, asking not to be identified discussing confidential information.
Representatives for AES, Brookfield and BlackRock declined to comment.
“We understand the buyer interest here as AES stock trades at a fairly significant discount and has remained relatively suppressed over the past few years,” analysts for CreditSights wrote in a research note.
The company must contend though with the accelerated phaseout of clean energy tax credits under the Trump administration, according to the report.
Jefferies Financial Group Inc analysts cautioned that there would be “significant hurdles” to selling the full company.
While AES owns valuable assets, it’s over-leveraged and must contend with restrictions on cash including payment covenants, repatriation limitations, indemnifications and payment guarantees, according to the Jefferies report on Wednesday by Julien Dumoulin-Smith and Paul Zimbardo.
The company’s adjusted net debt is 7.3 times its adjusted earnings before interest, taxes, depreciation and amortisation, they said.
AES was pivoting from fossil fuels to renewables, even before a 2018 push by activist investor ValueAct Capital Management.
While green energy accounts for most of the company’s growth, natural gas and coal still make up about half of its operations, according to the company.
Investors are betting that the immense computing power needed for artificial intelligence and cryptocurrency mining will fuel demand for companies that can help provide it and this is driving dealmaking across the sector.
This year, Blackstone Inc has agreed to take TXNM Energy Inc private for about US$11.8bil, and Constellation Energy Corp reached a deal to buy Calpine Corp for US$16.4bil.
AES has seen its stock erode as US President Donald Trump has put in place anti-renewable policies including permitting restrictions, higher tariffs and, most recently, a rapid phaseout of clean-energy credits as part of his budget bill.
The company in May reported adjusted earnings per share for the first quarter that missed analyst estimates. — Bloomberg
