The AES Corporation (AES - Free Report) , recently announced the merger of two Colorado-based energy services providers — Simple Energy and Tendril — to form a new company named Uplight. The merger combines Tendril’s data analytics platform with Simple Energy’s consumer engagement marketplace, and aims to offer a comprehensive suite of customer-facing solutions for electric and gas utilities.
AES Corp. made an investment worth $53 million in the Uplight merger, in addition to the investments it had made in Simple Energy last year.
Growing Importance of AI in the Utility Sector
Per an analysis by Frost & Sullivan, Artificial Intelligence (AI), in combination with advanced technologies like big data, cloud, and Internet of Things (IoT), can support the active management of electricity grids by improving the accessibility of renewable energy sources. The advanced AI algorithms help utility and energy companies understand consumer behavior and efficiently manage energy consumption across different sectors.
Going forward, AI is expected to significantly boost efficiencies across the renewable energy sector by automating operations in the solar and wind industries. Additionally, with the use of AI technologies, utility and energy companies could bring down a reduction in power outages by predicting conditions that cause power outages by identifying weak points in the electric grid.
How Will the Merger Benefit AES Corp?
Uplight is expected to become a one-stop marketplace for utilities’ customer-facing software needs. Considering the aforementioned discussions, we may expect the creation of Uplight to be a strategically apt decision that will reap the benefits of the growing AI-based Utility sector. In fact, more than 75 utilities in the world already use Uplight solutions to provide next-generation energy services to their customers.
Big Utility majors, such as Xcel Energy (XEL - Free Report) and Consumers Energy, a CMS Energy (CMS - Free Report) arm, have been using the Uplight platform to achieve their respective targets for zero coal production.
Evidently, the inclusion of such big utility companies and the rapid acceptance of AI within the utility sector will help Uplight extensively grow and cater to a larger market. This, in turn, will lead to an escalation in revenues and customer growth for AES Corp., as the company holds a significant stake in the newly merged venture.
Furthermore, AES Corp. plans to deploy the Uplight platform in Latin America, as it now works together with Uplight on community solar, e-mobility and advanced C&I offerings. Evidently, such notable developments will benefit AES Corp. in strengthening market share in the Latin American region.
AES Corp.'s shares have gained 35.8% in the past year compared with the industry’s growth of 12.1%. The outperformance may have been led by a systematic investment in base distribution and generation projects.
Zacks Rank & A Key Pick
AES Corp. currently carries a Zacks Rank #4 (Sell).
A better-ranked stock in the same space is DTE Energy (DTE - Free Report) , which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DTE Energy delivered average positive earnings surprise of 12.24% in the last four quarters. The Zacks Consensus Estimate for 2019 earnings has risen 0.32% to $6.22 in the past 90 days.
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