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AES Boosts Growth Outlook With Renewables & Data Center Deals
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Key Takeaways
AES is growing through renewables, storage and long-term PPAs with major data-center customers.
AES expects to sign at least 4 GW of PPAs in 2025 and has secured 2.2 GW year to date.
AES is retiring coal units and plans to exit most remaining coal facilities by year-end 2025.
The AES Corporation (AES - Free Report) continues to benefit from a diversified energy portfolio and strong long-term contracts with major customers like data centers. The company’s focus on expanding its renewable generation portfolio should act as a growth catalyst.
However, this Zacks Rank #3 (Hold) company faces risks related to declining wholesale prices and unfavorable weather patterns.
Factors Acting in Favor of AES
AES is accelerating its growth by investing in renewable energy and energy storage, using innovation and AI to improve clean-energy development, and benefiting from a globally diversified business. Rising power demand from AI-driven data centers is boosting opportunities, and long-term contracts (Power Purchase Agreements or PPAs) position AES as a key energy partner for tech companies.
The company expects to sign at least 4 gigawatts (GW) of PPAs in 2025 and has already signed or been awarded 2.2 GW year to date, including 1.6 GW with data center customers. It remains on track to meet its 2023-2025 target of 14-17 GW in signed PPAs.
To promote clean energy adoption, AES has also been rapidly retiring its coal-fired units, reducing carbon emissions from its portfolio. The company has made significant progress on its coal generation exit initiatives and intends to exit a major portion of its remaining coal facilities by year-end 2025.
Challenges Faced by AES
The wholesale prices of electricity have declined significantly in recent years due to the increased penetration of renewable generation resources, cheap natural gas and demand-side management. This trend is most likely to continue and might have a material adverse impact on the financial performance of the company.
AES’ hydroelectric generation facilities are sensitive to changes in the weather, particularly the level of water inflows into generation facilities. Dry hydrological conditions in Panama, Brazil, Colombia and Chile can present challenges for the company’s businesses in these markets. Low inflows can result in low reservoir levels, reduced generation output and subsequently increased prices for electricity.
AES’ Share Price Performance
In the past six months, shares of the company have risen 21.5% compared with the industry’s 7.6% growth.
Ameren’s long-term (three to five years) earnings growth rate is 8.52%. The Zacks Consensus Estimate for AEE’s 2025 EPS implies an improvement of 8% from that recorded in 2024.
CNP’s long-term earnings growth rate is 8.86%. The Zacks Consensus Estimate for 2025 EPS calls for an increase of 9.3% from that recorded in 2024.
OGE’s long-term earnings growth rate is 6.97%. The company delivered an average earnings surprise of 10.5% in the last four quarters.
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AES Boosts Growth Outlook With Renewables & Data Center Deals
Key Takeaways
The AES Corporation (AES - Free Report) continues to benefit from a diversified energy portfolio and strong long-term contracts with major customers like data centers. The company’s focus on expanding its renewable generation portfolio should act as a growth catalyst.
However, this Zacks Rank #3 (Hold) company faces risks related to declining wholesale prices and unfavorable weather patterns.
Factors Acting in Favor of AES
AES is accelerating its growth by investing in renewable energy and energy storage, using innovation and AI to improve clean-energy development, and benefiting from a globally diversified business. Rising power demand from AI-driven data centers is boosting opportunities, and long-term contracts (Power Purchase Agreements or PPAs) position AES as a key energy partner for tech companies.
The company expects to sign at least 4 gigawatts (GW) of PPAs in 2025 and has already signed or been awarded 2.2 GW year to date, including 1.6 GW with data center customers. It remains on track to meet its 2023-2025 target of 14-17 GW in signed PPAs.
To promote clean energy adoption, AES has also been rapidly retiring its coal-fired units, reducing carbon emissions from its portfolio. The company has made significant progress on its coal generation exit initiatives and intends to exit a major portion of its remaining coal facilities by year-end 2025.
Challenges Faced by AES
The wholesale prices of electricity have declined significantly in recent years due to the increased penetration of renewable generation resources, cheap natural gas and demand-side management. This trend is most likely to continue and might have a material adverse impact on the financial performance of the company.
AES’ hydroelectric generation facilities are sensitive to changes in the weather, particularly the level of water inflows into generation facilities. Dry hydrological conditions in Panama, Brazil, Colombia and Chile can present challenges for the company’s businesses in these markets. Low inflows can result in low reservoir levels, reduced generation output and subsequently increased prices for electricity.
AES’ Share Price Performance
In the past six months, shares of the company have risen 21.5% compared with the industry’s 7.6% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are Ameren (AEE - Free Report) , CenterPoint Energy (CNP - Free Report) and OGE Energy (OGE - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ameren’s long-term (three to five years) earnings growth rate is 8.52%. The Zacks Consensus Estimate for AEE’s 2025 EPS implies an improvement of 8% from that recorded in 2024.
CNP’s long-term earnings growth rate is 8.86%. The Zacks Consensus Estimate for 2025 EPS calls for an increase of 9.3% from that recorded in 2024.
OGE’s long-term earnings growth rate is 6.97%. The company delivered an average earnings surprise of 10.5% in the last four quarters.