The AES Corporation (AES) | Investment Case

1. Company Snapshot

1.a. Company Description

The AES Corporation operates as a diversified power generation and utility company.It owns and/or operates power plants to generate and sell power to customers, such as utilities, industrial users, and other intermediaries.The company also owns and/or operates utilities to generate or purchase, distribute, transmit, and sell electricity to end-user customers in the residential, commercial, industrial, and governmental sectors; and generates and sells electricity on the wholesale market.

It uses a range of fuels and technologies to generate electricity, including coal, gas, hydro, wind, solar, and biomass; and renewables, such as energy storage and landfill gas.The company owns and/or operates a generation portfolio of approximately 31,459 megawatts.It has operations in the United States, Puerto Rico, El Salvador, Chile, Colombia, Argentina, Brazil, Mexico, Central America, the Caribbean, Europe, and Asia.

The company was formerly known as Applied Energy Services, Inc.and changed its name to The AES Corporation in April 2000.The AES Corporation was incorporated in 1981 and is headquartered in Arlington, Virginia.

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1.b. Last Insights on AES

The AES Corporation's recent performance was driven by several positive factors. The company's Q3 2025 earnings report showed improvements in fundamentals, with EPS of $0.76 and reaffirmed full-year guidance. A robust renewables pipeline, strong data center demand, and proactive risk management in US policy and supply chain have positioned the company for growth. Additionally, AES reported progress toward completing large-scale projects, with 2.9 GW completed year-to-date and a PPA backlog of 11.1 GW. The company also filed settlements at AES Indiana and AES Ohio and a 20-year Integrated Resource Plan at AES Indiana.

1.c. Company Highlights

Last Price	14.12
Change Percentage	1.33%
Open	14.09
Previous Close	13.93
Market Cap ( Millions)	10050
Volume	2711777
Year High	15.51
Year Low	9.46
M A 50	14.09
M A 200	12.39

FCF Yield	-22.02%
Dividend Yield	4.98%
ROE	31.65%
Debt / Equity	798.16%
Net Debt / EBIDTA	860.94%
Price To Book	2.61
Price Earnings Ratio	8.89
Price To FCF	-4.54
Price To sales	0.83
EV / EBITDA	11.59

2. AES Delivers Strong Q3 2025 Results with Robust Growth in Renewables and Utilities

AES reported a significant increase in adjusted EBITDA to $830 million in Q3 2025, up from $698 million a year ago, driven by the growth of new renewables projects, rate-based investment at U.S. utilities, and continued progress on the cost savings program. The company's actual EPS came out at $0.75, beating estimates of $0.712. Revenue growth is expected to be around 3.5% next year, indicating a stable outlook. The company's financial performance is reflected in its valuation metrics, with a P/E Ratio of 8.85, P/B Ratio of 2.6, and EV/EBITDA of 11.57, suggesting a relatively stable valuation.

Publication Date: Nov -13

                                    📋 Highlights
                                    Reaffirmed Guidance:
                                                Maintained 5%-7% long-term adjusted EBITDA growth through 2027, with low teens growth expected next year.
Renewables EBITDA Surge:
                                                46% YoY increase driven by 10 GW of projects online and 12 GW signed since 2023.
Cost Savings Progress:
                                                Achieved $150M in 2025 savings, on track for $300M annual run rate by 2026.
Capital Allocation:
                                                Returned $500M+ in dividends while investing $1.8B in renewables/utilities growth in 2025.
PPA Momentum:
                                                Signed 2.2 GW of PPAs YTD (primarily data centers), targeting 4 GW total for 2025.

                                

Renewables Growth Drives EBITDA Increase

The renewables segment saw a 46% increase in EBITDA year-to-date, primarily driven by the organic growth of new projects coming online and the maturing of the U.S. renewables businesses. The company is confident in signing 4 gigawatts of new PPAs this year, delivering energy solutions at attractive returns. As Stephen Coughlin explained, the 50% growth in the Renewable segment includes the adjusted pro forma basis for Chile renewables in 2024, which affects the growth rate.

Utilities Segment Continues to Perform Well

The U.S. utilities segment is focused on serving customers with affordable and reliable power, addressing increased demand in service territories. AES is among the lowest-cost providers in Indiana and Ohio, maintaining this position following the resolution of active rate cases. The partial settlement in the Indiana rate case strikes a balance between affordability and necessary grid investments, with AES Indiana agreeing to reduce the original revenue increase by $105 million, or 53%.

Cost Savings and Balance Sheet Strength

AES has already realized the majority of the $150 million in cost savings for this year and is on track to achieve a $300 million annual run rate in 2026. The company's balance sheet is strong, with $2 billion of cash removed through cost-cutting and sell-downs, and a consolidated Moody's FFO to net debt metric tracking ahead of the agreed path. The Net Debt / EBITDA ratio stands at 8.61, indicating a relatively high level of debt, but the company is confident in achieving the 12% target by the end of 2026.

Outlook and Valuation

AES reaffirms its 5% to 7% long-term growth rate for adjusted EBITDA through 2027, with a strong step-up expected over the next two years. The company's guidance and long-term growth rates remain largely derisked, with an 11.1 gigawatt project backlog representing 3 to 4 years of built-in growth. With a Dividend Yield of 5.0%, the stock offers an attractive income stream, but the Free Cash Flow Yield is negative at -22.11%, indicating a potential concern. The ROE stands at 31.65%, suggesting a relatively high return on equity. Overall, AES's valuation metrics and growth prospects indicate a stable outlook, with the stock offering a mix of income and growth potential.

3. NewsRoom

Why Is AES (AES) Down 3.6% Since Last Earnings Report?

Dec -04

Source: zacks.com

Bright Minds Biosciences to Present at Piper Sandler 37th Annual Healthcare Conference and 2025 AES Annual Meeting

Nov -25

Source: globenewswire.com

GEV vs. AES: Which Is Better Positioned for the Clean-Energy Boom?

Nov -24

Source: zacks.com

AES Corporation At 6.5x P/E Is Way Too Cheap

Nov -14

Source: seekingalpha.com

AES Gains Momentum From Renewable Energy Expansion and LNG Growth

Nov -11

Source: zacks.com

AES Corporation: No News Is (Probably) Good News

Nov -06

Source: seekingalpha.com

The AES Corporation (AES) Q3 2025 Earnings Call Transcript

Nov -05

Source: seekingalpha.com

AES Q3 Earnings Miss Estimates, Revenues Increase Y/Y

Nov -05

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.80%)

6. Segments

Energy Infrastructure Strategic Business Unit

Expected Growth: 6%

AES' Energy Infrastructure Strategic Business Unit growth is driven by increasing demand for clean energy, expansion into new markets, and strategic acquisitions. The unit's focus on renewable energy sources, energy storage, and grid modernization also positions it for growth. Additionally, government incentives and regulations supporting the transition to a low-carbon economy further boost the unit's prospects.

Utilities Strategic Business Unit

Expected Growth: 5%

AES Corporation's Utilities Strategic Business Unit growth is driven by increasing demand for renewable energy, grid modernization, and energy storage. Additionally, strategic acquisitions, expansion into new markets, and cost savings initiatives contribute to the 5% growth rate. Furthermore, investments in digital technologies and customer-centric solutions enhance operational efficiency and customer satisfaction, supporting long-term growth.

Renewables Strategic Business Unit

Expected Growth: 7%

AES' Renewables Strategic Business Unit's 7% growth is driven by increasing demand for clean energy, declining renewable technology costs, and favorable government policies. Additionally, the unit's diversified portfolio of wind, solar, and energy storage projects, as well as its strategic partnerships and acquisitions, contribute to its growth momentum.

Eliminations

Expected Growth: 0%

AES Corporation's eliminations segment shows 0% growth, driven by stagnant revenue from intercompany transactions, lack of new business opportunities, and absence of cost savings initiatives. Additionally, the company's focus on renewable energy and decarbonization efforts has not led to significant eliminations growth.

Corporate and Other

Expected Growth: 4%

The 4% growth in Corporate and Other segment of The AES Corporation is driven by increasing demand for renewable energy solutions, strategic acquisitions, and expansion into new markets. Additionally, cost savings initiatives and operational efficiencies have contributed to the growth. Furthermore, the company's focus on energy storage and grid modernization has also driven revenue growth in this segment.

New Energy Technologies Strategic Business Unit

Expected Growth: 8%

AES's New Energy Technologies Strategic Business Unit is driven by increasing demand for renewable energy, declining costs of solar and wind power, and growing adoption of energy storage solutions. Additionally, government incentives and policies supporting clean energy transition, such as tax credits and renewable portfolio standards, contribute to the unit's 8% growth.

7. Detailed Products

Generation

AES generates electricity from a diverse portfolio of fuels, including coal, gas, hydro, wind, and solar.

Distribution

AES owns and operates distribution networks that deliver electricity to customers.

Renewable Energy

AES develops and operates renewable energy projects, including wind, solar, and hydroelectric power.

Energy Storage

AES provides energy storage solutions to help utilities and companies manage energy demand and supply.

Energy Efficiency

AES offers energy efficiency solutions to help customers reduce energy consumption and costs.

Electric Vehicle Charging

AES provides electric vehicle charging infrastructure and services.

8. The AES Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for AES Corporation is medium due to the availability of alternative energy sources such as solar and wind power. However, the high cost of switching to these alternatives and the lack of infrastructure in some areas reduce the threat.

Bargaining Power Of Customers

The bargaining power of customers for AES Corporation is low due to the lack of alternative energy providers in many areas and the high cost of switching to alternative providers.

Bargaining Power Of Suppliers

The bargaining power of suppliers for AES Corporation is medium due to the availability of multiple suppliers for fuel and other inputs. However, the high cost of switching to alternative suppliers and the lack of substitutes for some inputs reduce the bargaining power of suppliers.

Threat Of New Entrants

The threat of new entrants for AES Corporation is low due to the high barriers to entry in the energy industry, including the need for significant capital investment and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry for AES Corporation is high due to the competitive nature of the energy industry and the presence of multiple competitors in the market.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	87.09%
Debt Cost	3.95%
Equity Weight	12.91%
Equity Cost	9.31%
WACC	4.64%
Leverage	674.42%

11. Quality Control: The AES Corporation passed 3 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Otter Tail

A-Score: 6.6/10

Value: 5.3

Growth: 7.0

Quality: 6.5

Yield: 6.0

Momentum: 6.0

Volatility: 8.7

1-Year Total Return ->

NorthWestern

A-Score: 6.5/10

Value: 6.1

Growth: 3.4

Quality: 5.1

Yield: 8.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

Avista

A-Score: 6.3/10

Value: 6.5

Growth: 4.2

Quality: 4.3

Yield: 8.0

Momentum: 4.5

Volatility: 10.0

1-Year Total Return ->

Black Hills

A-Score: 6.2/10

Value: 5.2

Growth: 4.4

Quality: 4.4

Yield: 8.0

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

MGE Energy

A-Score: 5.1/10

Value: 2.5

Growth: 5.2

Quality: 5.8

Yield: 4.0

Momentum: 3.5

Volatility: 9.7

1-Year Total Return ->

AES

A-Score: 5.1/10

Value: 6.6

Growth: 5.4

Quality: 3.5

Yield: 8.0

Momentum: 3.0

Volatility: 4.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

14.25%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

4.64%

The AES Corporation - US00130H1059

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on AES

1.c. Company Highlights

Average Quality

Fairly Valued

Medium Volatility

Earnings Beats

Revenues Miss

Average Growth

Lower Quality

Average Yield

Stable Momentum

Weak Momentum

Cheaper

Earnings Miss

More Volatile

Higher Yield

2. AES Delivers Strong Q3 2025 Results with Robust Growth in Renewables and Utilities

Renewables Growth Drives EBITDA Increase

Utilities Segment Continues to Perform Well

Cost Savings and Balance Sheet Strength

Outlook and Valuation

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.80%)

6. Segments

Energy Infrastructure Strategic Business Unit

Expected Growth: 6%

Utilities Strategic Business Unit

Expected Growth: 5%

Renewables Strategic Business Unit

Expected Growth: 7%

Eliminations

Expected Growth: 0%

Corporate and Other

Expected Growth: 4%

New Energy Technologies Strategic Business Unit

Expected Growth: 8%

7. Detailed Products

Generation

Distribution

Renewable Energy

Energy Storage

Energy Efficiency

Electric Vehicle Charging

8. The AES Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: The AES Corporation passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

14.11$

12.e Scoring ^Insights

12.f DCF ^BETA