AES Corp. to Divest Stake in Solar JV Projects - Analyst Blog

The AES Corp. AES announced that it has struck a deal with SunEdison Inc. SUNE to divest 50% of its interest in the 336 megawatt MW solar photovoltaic (PV) projects owned by Silver Ridge Power, LLC.

Per the deal, AES Corp. will sell its stakes in solar programs, which are currently in service and in the development phase in the U.S., Europe and India. The transaction is priced at $165 million and is subject to customary regulatory approvals. Silver Ridge Power is a partnership venture between Riverstone Holdings LLC and AES Corp.

The company anticipates receiving regulatory consent by the end of this month. The recent stake sale is part of the company's efforts to boost shareholders' returns through the proceeds gained.

AES Corp. solar stake sale comes as a surprise given the Environmental Protection Agency's (EPA) policies that aim at promoting renewable energy use in power generation. The recent EPA proposal calls for a 30% reduction in carbon emissions from coal-fired plants by 2030 from the 2005 level.

AES Corp.'s decision to sell interest from its solar project is strategic as solar power holds a nominal share in the company's overall generation mix and will unlikely hurt its renewable generation portfolio. Presently, the company is focused on expanding its wind and hydroelectric assets instead. The company generates 29% of its total electricity from renewable sources with wind and hydroelectricity ruling the renewable mix.

AES Corp., however, will hold onto its 50% interest in the solar projects in Puerto Rico and Spain. The company also provided SunEdison with the option of purchasing AES Corp's 50% stake in the 130 MW solar project in Italy for an extra $42 million by Aug 2015.

Meanwhile, AES Corp. will collect $50 million as proceeds from Google Inc.'s GOOG tax equity investment in the 266 MW Mount Signal project in California that commenced operation in Apr 2014.

Going forward, bullish power demand in the markets of Chile, Central America and Asia is the key factor behind the company's increased utility-scale investments in these regions. AES Corp. has been systematically exiting from non-competitive markets to concentrate its resources on high-growth assets. It has a sizeable construction backlog of 4,100 MW, comprising a 1,320 MW coal plant in India and the 531 MW hydroelectric project in Chile.

Currently, the company carries a Zacks Rank #3 (Hold). Another better-ranked utility player looking good in the market includes Zacks Ranked #1 (Strong Buy) Entergy Corp. ETR.

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