(C) Reuters. Is AES Corp. a Good Utilities Stock to Own?
Given analysts’ expectations of a substantial rise in LNG demand over the next five years, AES Corporation (AES), which is working to expand its LNG base, should gain significantly in the long run. However, considering the stock’s weak momentum over the past few months, is AES a good investment now? Let’s discuss.The AES Corporation (NYSE:AES) in Arlington, Va., is a diversified power generation and utility company. It owns and operates power plants to generate and sell power to customers that include utilities, industrial users, and other intermediaries. The company’s global footprint spans more than 14 countries, operating more than 100 power plants. Shares of AES have gained 20%-plus in price over the past year. In addition, the stock is relatively stable, as reflected by its beta of less than 1.
The company is actively working to strengthen its renewable energy portfolio amid sustainability initiatives worldwide. Moreover, AES is seeking to achieve net-zero emissions by 2040. Recently, it announced the acquisition of a 49.9% stake in AES Colon, a liquefied natural gas (LNG) plant, increasing its ownership to 100%. LNG emits less carbon than other fuels. “This acquisition will contribute to maximizing the value of our regional LNG business through the development of important synergies and flexibility across our portfolio,” said Juan Ignacio Rubiolo, President for AES’ Mexico, Central America, and the Caribbean Strategic Business Unit.
In September, PetroVietnam Gas signed an agreement with AES to form a joint venture to operate an LNG terminal as part of a $1.3 billion LNG-to-power complex. Analysts expect structural global LNG demand to rise 14% by 2025. Also, the U.S.’ liquefaction capacity could rise by more than half, overtaking Australia by 2024. Given the upbeat demand projections, we think AES should benefit in the long term. However, these developments are not expected to generate immediate returns.
Is AES Corp. a Good Utilities Stock to Own?
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