Stock Analysis & Valuation The AES Corporation (AES.DE)

• Previous Close: €23.55
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, €	Upside, %
Artificial intelligence (AI)	n/a	n/a
Intrinsic value (DCF)		n/a
Graham-Dodd Method	5.40	-77
Graham Formula	10.80	-54

Strategic Investment Analysis

Company Overview

The AES Corporation (AES) is a global power company headquartered in Arlington, Virginia, specializing in electricity generation and distribution through renewable and thermal energy sources. Operating across six strategic business units—the United States, Andes, Brazil, Mexico, Central America and the Caribbean (MCAC), Europe, and Asia—AES manages a diversified portfolio of power assets, including 18 generation facilities and two integrated utilities in the U.S. alone. The company is a key player in the transition to cleaner energy, with significant investments in renewables alongside traditional thermal generation. AES serves millions of customers worldwide, leveraging its extensive infrastructure and operational expertise to deliver reliable power solutions. With a workforce of 21,000 employees, AES is positioned as a leader in the utilities sector, balancing growth in emerging markets with stable operations in developed regions. Its commitment to sustainability and innovation makes it a critical participant in the global energy transition.

Investment Summary

AES presents a mixed investment profile. On the positive side, the company operates in the essential utilities sector, providing stable revenue streams from its diversified global operations. Its focus on renewable energy aligns with long-term sustainability trends, potentially offering growth opportunities. However, the company reported a net loss of €546 million in FY 2022, with negative diluted EPS of -€0.82, signaling financial challenges. High capital expenditures (€4.55 billion) indicate aggressive reinvestment, which may pressure short-term profitability. The dividend yield (€1.4132 per share) could appeal to income-focused investors, but the negative earnings raise sustainability concerns. Investors should weigh AES's growth potential in renewables against its current financial performance and debt levels.

Competitive Analysis

AES competes in the highly regulated and capital-intensive utilities sector, where scale and geographic diversification are critical advantages. The company's global footprint across six regions provides revenue stability and reduces reliance on any single market. AES's strategic focus on renewable energy differentiates it from traditional utility peers, positioning it to benefit from the global shift toward cleaner energy. However, the company faces intense competition from both established utilities and specialized renewable energy firms. Its ability to manage high capital expenditures while transitioning to greener assets will be key to maintaining competitiveness. AES's operational efficiency and regulatory expertise in multiple jurisdictions are strengths, but its recent financial losses highlight execution risks. The company must balance growth investments with profitability to sustain its market position.

Major Competitors

• NextEra Energy (NEE): NextEra Energy is a leader in renewable energy, particularly wind and solar, with a strong balance sheet and consistent profitability. Its scale and expertise in renewables give it an edge over AES in the U.S. market. However, AES's broader international presence provides diversification benefits that NextEra lacks.
• Duke Energy (DUK): Duke Energy is a dominant U.S. utility with a focus on regulated operations, offering stable cash flows. Its larger market cap and lower reliance on international markets contrast with AES's global exposure. Duke's slower renewable transition compared to AES may limit long-term growth potential but reduces near-term execution risks.
• Enel (ENEL.MI): Enel is a European utility giant with a strong renewable energy portfolio and global operations. Its larger scale and deeper renewable expertise pose a challenge to AES in Europe and Latin America. However, AES's presence in the U.S. and Asia provides geographic diversification where Enel is less dominant.
• Iberdrola (IBE.MC): Iberdrola is a global leader in renewables, particularly in Europe and Latin America, with a robust financial profile. Its aggressive investments in clean energy and grid modernization outpace AES in some markets. However, AES's U.S. footprint and thermal assets offer a more balanced energy mix compared to Iberdrola's heavier renewable focus.